Analysts: Michelin financial results ‘light’, but cashflow good and dividend flat

Following the publication of Michelin’s full-year 2014 results and 2015 guidance, some financial analysts described the figures as “light of expectations”. This, they said, was expected to lead to falls in Michelin’s share price in response. But the share price didn’t fall, in fact it was up about two cents by the time the markets close on 11 February, the day after the figures were announced.

Michelin’s 2014 sales of 19.553 billion euros may have been in line with estimates, but Morgan Stanley reports that price mix was “a negative 449 million euros or 2.2 per cent. Meanwhile “clean operating profit of 2.170 billion euros was 3 per cent lighter than Morgan Stanley’s estimates. Margins came in at 11.1 per cent compared to estimates of 11.4 per cent.

Offering their view on the findings in an investor’s note dates 10 February, Morgan Stanley wrote that operating profit was “negatively impacted by a weaker performance in each division.” Michelin’s Speciality Tyres division, which includes the world famous OTR departments that has routinely been something of a cash cow for the company, missed estimates by 6 per cent. In this case the operating profits were 574 million and represented a 19.3 per cent margin versus estimates of 608 million euros and 20.3 per cent respectively.

However on a more positive note, free cash flow was described as “strong” at 722 million euros compared with estimates of 608 million euros. Nevertheless the dividend was maintained at 2.5 euros per share compared with estimates of 2.64 euros. Looking forward into 2015, Michelin is expecting an “increase in operating profit” compared with expectations of a 13 per cent increase and free cash flow of circa 700 million euros (which is flat year-on-year).