Analysts: Fourth quarter results key for Pirelli 2012 outlook

When Pirelli releases its fourth quarter financials on Monday, the results are likely to be a barometer of what can be expected from the company in the rest of 2012. That’s the view of financial analysts from Morgan Stanley that published their view in an investors note dated 8 March.

Their prediction is that Pirelli will report figures on the positive side of being in line with expectations: “We believe Pirelli will deliver 139 million euros of reported EBIT, a touch higher than the street and Pirelli’s targets.

However, according to the market watchers who do their own tyre market sentiment research, feedback from tyre dealers in Europe has been “depressing” recently, with “very little confidence in demand levels and first signs of consumer trading down and discounts from tyre manufacturers.”

That’s said Morgan Stanley stressed that Pirelli’s strategy of achieving structural change in profitability focuses on an internal shift of production and sales towards premium tyres – which Pirelli is already strong in. As a result the analysts were upbeat about the company’s prospects: “we believe customers may be largely unaffected by current market weaknesses.”

Their view is that it is realistic to expect a slower first half of the year versus the second half of 2012. And their warning was that “should management fail to address sceptics’ concerns at the fourth quarter release, we believe the stock could suffer in the short term.”

Nevertheless their commentary suggests confidence in the company’s forthcoming results and future performance: “We are convinced that Pirelli will reiterate its 2012-14 targets, although we would watch out for any qualitative commentary from management.”

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