Continental Earnings: Preliminary Revenue and Margin Fall Short

Narrow-moat Continental reported disappointing preliminary first-quarter key financial figures, sending shares down over 5% intraday. Consolidated revenue of EUR 9.8 billion and an adjusted EBIT margin of 2% fell short of company-compiled consensus at EUR 10 billion and 3.7%, respectively. Continental cited unfavorable mix, foreign-exchange headwinds, and continued labor inflation as contributors to the poor quarter. There was no redeeming element in the release, with the automotive, tires, and ContiTech sectors all missing estimates. Despite this, management reiterated full-year guidance. We continue to forecast 2024 revenue marginally below the midpoint and adjusted EBIT margin at the bottom end of guidance. We maintain our EUR 108 fair value estimate and view the shares as undervalued.