Continental AG stock analysis 2019 – great stock for value Investors
Hi and Welcome make urself comfortabele and Let’s talk about Continental the German vehicle subcontractor. The share has been hit hard on the stock exchange market. Next year, the company is about to get divided into three parts. The automotive industry faces major challenges as i wrote in my older post, but the real question is whether the valuation is getting attractive.
The stock market has not been kind to the car industry and their subcontractors.
Really big hits have been taken by the subcontractors. One of the company that got hit hardest on the stock market is the German company Continental.
In 2018 the share have fallen by around 50%. Mainly because of profit warnings but also because car industry faces bigger transformations towards electric cars and political debate about environmental dangers. In Sweden people are scared to buy diesel cars now. All the new about polution and higher taxes makes people nervous. I myself had an expensive diesel car not long ago. A nice CLS AMG because of the higher debate about polution I sold it.. It was wise now days you can see that car prices falls. Germany wants to ban some diesel into the city and Sweden is also thinking in that direction. Is you country also doing restriction on diesel cars? And sells of new cars have dropped big time.
If vehicle salve drops that mean Continental will have less sales, that correlates with each other.
There is a political force in Europe that wants cleaner cars, environment friendly. We want to be more comfortable and have cars that are driverless. This mean a big task for car companies of the world. Those who will fail in transform into this direction will maybe disappear or at least die slowly, that’s why I think. Will Continental keep up with this transformation? Well that are planning to cut the big conglomerate into three smaller independent companies thats a start for sure. There will be Rubber tires, Automotive technology and powertrain / Transmission. All parts will be listed on the stock market. This change should be completed in 2020. First of to be deployed as an individual company will be Powertrain / Transmission
Continental (click me ) was founded in Hannover german town in 1871! The company employees more than 250 000 persons and is one of the big leaders in supply of the automotive industry in the world. The company have more than 60 locations in different countries. Around half of them work outside Europe. Some big achievements is the development av pattern tires, then studded tires and also environment friendly tires.
Continental develops today not only tires but also braking systems and other important components for cars. They have five divisions, some of the division are Chassis and Safety, Active and passive safety, automotive dynamics. This means that in some cases they are fighting over the Swedish company Autolive. To read my post about Autoliv INC ( click here ).
Tire production is still the largest part of revenue by almost 25%. This is good because safety will always be a big priority for good car makers.
Keeper or not? What do you think? Is Continental a buy at these levels? The P/E 8.8 for current year and 8.4 for next year.
This year Continental have given us two profit warnings. Due to falling car sales in China and Europe. They have given us a new forecast revenue 46 billion EUR from 47. The result for third quarter showed that sales increased 13% compared with last year same quarter. Earning per share where 3.13 EUR, lower than last year 3.64 EUR per share.
Most analysts believe that Continental will achieve the target revenue of 50 billion euros only in 2021. The 2019 yield is expected to be 3.6 percent. For investors with guts who dares to go against the bear market this could prove interesting case. We know the the vehicle industry is facing major changes and harsher requirements. But this mean also that changes need to be done. And with changes comes opportunities and Continental have proven before that its a fast adapting company. Who have survived very long. The electrification of cars may not come as fast as we want to. And for now there only to see and watch how the world changes. I think that Continental is getting attractive to buy at these levels.
If you want to read my old post about the future of European car industry ( click here )
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Source: marketscreener, continental offical page, mercedes facebook community, swedbank, Wolfsbruk factory friend, Nordnet, Avanza, factset,