Stellantis Shares (NYSE:STLA) fell on Thursday after the company’s CEO Carlos Tavares confirmed that the company’s dividend and share buyback program will remain intact for 2024. However, he did not rule out the possibility of adjustments in 2025 as the investors worry that the auto industry’s financial difficulties could affect future distributions.
Stellantis saw its shares fall more than 3% in pre-US trading, while its European shares fell 3.6% to their lowest level since July 2022. This came after a recent profit warning sparked concerns on the sustainability of dividend and buyback plans.
“Our commitments were made for 2024 and they will be kept. The time for 2025 has not come, we will see what happens at the end of 2024 for a discussion and a decision for 2025,” Tavares said during a visit to the plant in the southern France, addressing the company’s dividend policy.
Stellantis owns popular car brands such as Chrysler, Jeep, Fiat, Citroen and Peugeot (OTC:PUGOY). Its stock has fallen more than 43% this year, making it the worst performer among European automakers.
Kevin Thozet, of Carmignac’s investment committee, commented that European carmakers were “falling like autumn leaves”, with Stellantis’s profit warning pointing to “zero operating margin in the second half of this year”.
“This is a real blow to the investment thesis as it could put the generous dividend at risk and very likely mean ‘goodbye’ to acquisitions,” Thozet added.
Meanwhile, analysts at Barclays downgraded Stellantis stock from Overweight (OW) to Equal Weight (EW) and cut its 2024-26 EBIT estimates by 33-45%, citing significant cuts to free cash flow (FCF ) that created doubts about the car industry. ability to sustain dividend and buyback initiatives;
“We caught the STLA, slow to recognize the US inventory issue and eroding EU/US market shares,” the analysts noted.
“With no real proof points for recovery until H1-25 at the earliest, we downgrade to EW (from OW) – but view FCF as supportive.”
Barclays also cut its target price on Stellantis shares to €12.50 from €23.
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Reference;
Karaahmetovic, V. (2024) Stellantis stock hits a 2-year low on dividend concerns, Barclays downgrade By Investing.com, Investing.com. Investing.com. Available at: https://www.investing.com/news/stock-market-news/stellantis-stock-hits-a-2year-low-on-dividend-concerns-barclays-downgrade-3647136 (Accessed: 3 October 2024).
