Analysts: Foreign exchange outlook the only bad news in Pirelli results

Financial analysts have responded positively to Pirelli’s full-year 2013 financial results, with some reiterating their “outperform” guidance. The upbeat response was markedly different to the warnings of some market observers 24 hours earlier, which suggested the emerging market exposure (and its linked foreign exchange fluctuations) and Russian volatility in particular could undermine the company’s 2014 and 2015 outlook. The response follows Pirelli reiteration of its guidance for 2014 EBIT (850 million euros) in-line with consensus, but some way below some analysts’ estimates (4 per cent below estimates from Exane analysts for example).

The fact that Pirelli, which generates more than half of its revenue in emerging markets, lowered its foreign exchange outlook (-9/10 per cent versus -2/3 per cent) was described as the only bad news. According to an Exane investor’s note published 28 March, Pirelli sounded even more upbeat on European pricing than its main competitors. COO Mr Borgo explained Pirelli is outperforming the market thanks to its strong roots in the price resilient premium car segment, further support comes from a growing equity base in its German distribution helping to stabilise Pirelli’s pricing in a core premium market.

However the apparent crumbling of any hopes that Pirelli will be part of a merger/acquisition story was a disappointment for those in the financial community. Having said that the analysts suggest that this news has since been fully absorbed and therefore “the market will start looking at earnings momentum again”.