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Sell, €100->€84: Following BMW’s recent profit warning partly due to weak sales in China, UBS analyst, Patrick Hummel has recommended selling Volkswagen shares. He is optimistic about the premium segment leaders such as Mercedes-Benz due to price discipline and greater innovative power. He also pointed out the impending restructuring costs at Volkswagen.
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Buy, €120: Analyst Romain Gourvil of Berenberg said the tone of the car manufacturers was conservative during the conference. He pointed out that German automakers are moving from one worry to the next and that 2025 is likely to be marked by more restructuring measures.
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- Sell, €84: UBS said the reduced guidance will have an impact on the coming year. Analyst Patrick Hummel believes the market consensus for operating profit may be 30% higher.
- Outperform, €131: Analyst Tom Narayan of RBC said Volkswagen’s 2024 operating result was already lower than the previous outlook but could now fall by 3 billion euros. He also expects next year’s operating result estimates to drop by 6.5 to 7.5 billion euros.
- Neutral, €128: JPMorgan said the operating result outlook is now below their 20.7 billion euros estimate and Bloomberg’s estimate of 21 billion euros.
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Outperform, €102->€100: Analyst Tom Narayan of RBC cited a number of challengers facing Volkswagen such as the 2025 CO2 regulation and lose of market share in China. He believes that if governments such as the German government introduces EV incentives, it will help the company.
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Citi says investor concerns over Porsche are exaggerated
- Citi associated the continued drop in Porsche shares to a number of investor concerns that they say are unlikely to materialize.
- The analysts said the drop in shares are linked to a decline in Chinese sales, weaker performance of the Macan model, global pricing issues, EU CO2 regulation, potential tariffs, and a drop in Porsche’s earnings per share.
- Citi flagged that while China’s contribution to Porsche’s EBIT might decline to 12%-15% next year, the impact remains relatively limited.
- Citi estimates a mid-single digit impact from the China and U.S. tariffs.
- They expect its earnings to rebound in 2025, driven by easier comparisons and improvement in margins to 15%.
- Citi said management’s execution remains a key focus, especially in addressing the ongoing operational issues.
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Neutral, €110 (preference shares): Analyst Jose Asumendi of JPMorgan said 2025 will be characterized by low global production growth, trade tensions, slow electrification, and market gain by Chinese players. He expects investors to continue to focus on strong cash flows that allow dividends and share buybacks.
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Sell, €84->€75: Analyst Patrick Hummel of UBS said the restructuring at the Volkswagen brand will be a marathon. He expects operating profit and cash flow to be under pressure in 2025 and beyond. Hummel pointed out that arguments such as significant valuation discount and active action against structural cost problems are unlikely to hold water for the time being.
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Overweight, €110-> €100: Analyst Henning Cosman of Barclays said tariffs, CO2 emissions, China, inventories and prices remain important topics. He pointed out that the profit potential compared to expectations that have been trimmed is receiving more attention again. He is seeing short-term pain in favor of long-term advantages.
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Market-perform, €105: Analyst Stephen Reitman of Bernstein said after 40 years of being in the industry, he can’t remember a time when there was such a “perfect storm” of challenges and uncertainties. He pointed out that electrification is catching most giants off-guard, coupled with fluctuating demand and competition from Chinese players. He said the company still has to prove itself unlike BMW and Renault which have shown flexibility.
https://www.finanzen.ch/analyse/volkswagen-vw-vz-market-perform-977336
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Neutral, €114->€98: Analyst George Galliers of Goldman Sachs expect another challenging year for European automotive industry. He said that he lowered his operating profit estimates for 2025 by an average of 9%.
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Neutral, €105->€102: Analyst Stephen Reitman of Bernstein said he remains skeptical about a revaluation, even if the sector is trading at a significant discount compared to the overall market.
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Volkswagen brand says 6% operating margin is now more realistic in the medium term, Volkswagen Group expects to pay 1.5 billion euros for non-compliance with the CO2 regulation
- According to Bernstein, Volkswagen told analysts that operating margin of 6% at the Volkswagen Brand in the medium term is now more realistic, compared to earlier target of 6.5% by 2026.
- Out of the 35,000 job cuts targeted by the company by 2030, 24,000 will be achieved through natural attrition, Bernstein said.
- Bernstein pointed out that Volkswagen said its order book in Western Europe is slightly larger than the pandemic at 850,000 jobs.
- Volkswagen expects to pay around 1.5 billion euros for non-compliance with the EU CO2 regulation.
Assessment
I think the reduced margin guidance at the Volkswagen brand was expected given that most of the benefits of the collective agreement will likely arrive in 2029. My recent estimate assumes that the 6% operating margin will arrive in 2028.
The good news is on the CO2 penalty guidance. The 1.5 billion euros guided by the management is significantly lower than my estimate of 2.8 billion euros. However, we currently don’t know if the 1.5 billion euros is after pooling or before. If it’s before pooling, the CO2 headwind would be significantly lower.
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According to Bloomberg, Rolf Woller, VW’s head of investor relations told analysts that the €1.5 billion headwind includes the penalties for missing the 2025 targets and earnings losses by having to sell more EVs, which are less profitable compared to the ICEs.
Assessment
If this is correct, then the 2025 CO2 impact becomes significantly less than expected.
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HSBC raised Volkswagen’s rating to 125 euros from 90 euros.
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RBC said it raised Volkswagen’s earnings estimates for 2024 and 2025 to 20.77 billion euros and 19 billion euros from 20.62 billion euros and 18.21 billion euros, respectively.
“We raise estimates on better Audi estimates, which more than offset, lower Porsche numbers coming from the pre-announcement. We also now integrate more CARIAD and Battery losses into our numbers,” analysts said.
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Neutral, €98-> €102: Analyst George Galliers of Goldman Sachs expects Volkswagen to report operating profit of 5.55 billion euros for Q4. He pointed out that the company is likely to set targets for 2025 that are above the consensus.
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Buy, €112->€122: Berenberg said Volkswagen’s product momentum is set to be strong this year and said it revised upwards the group’s revenue and EPS estimates for 2025 and 2026.
“While uncertainty remains high across the automotive sector, notably due to increasing trade tensions and a constantly evolving tariff situation, VW is now fully embracing much-needed fixed-cost reductions and associated measures to tackle group production inefficiencies (notably in Germany and at the VW brand), providing margin support,” analysts said. “Moreover, product momentum is set to be strong this year, helping VW navigate competitive pressures.”