Analysts Raise Conti Earnings Estimate 20%

Analysts at Deutsche Bank has upgraded Continental AG’s stock rating to “buy” after raising its earnings per share (EPS) estimates by more than 20 per cent for 2010 and 2011. According to the analysts the revision is entirely attributable to better volumes: “With car production in the second quarter close to the first quarter, our new second quarter adjusted EBIT estimate is 540 million (versus 400 million euros previously) and our full year adjusted EBIT is upgraded by 13 per cent to 1.87 billion euros (consensus: 1.75 billion).” Writing in an investor’s note published on 11 June, the analysts explained that this corresponds to an EBIT margin of 8.1 per cent and to an adjusted EPS of 3.9 euros, 8 per cent above consensus.

According to the analysts organic growth of Conti’s Automotive division is “robust”, growing 8 per cent per annum, significantly more than car production growth of around 3 – 4 per cent a year. This is said to be because “50 per cent of the portfolio accounts for the fastest growing products in the auto industry.” The Deutsche Bank analysts also appeared to support the economic and strategic value behind Conti’s purchase of Siemens VDO, which some analysts have said the company paid too much for: “This is why, even if acquired at a high price, VDO will be progressively digested and will generate value for shareholders,” they commented adding: “This is our second upgrade in two months. VDO is now getting progressively digested. As a consequence, we upgrade our target price by 20 per cent to 50 euros.”

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