Company Reports

Volkswagen has revised its full-year estimates downward in a challenging market environment, highlighting weakness in its core passenger and commercial vehicle segments, as well as technical components. The company has warned of further deterioration in its operating results for these segments, should the macroeconomic environment weaken further.

VW has a long history of high capital spending, stubbornly growing fixed-cost base, and net cash outflows. Management touts the firm's advantages of global scale and strong brands. However, its financial metrics compare unfavorably with peers. Investors seem fatigued. VW’s 75.4% share in Porsche accounts for about 100% of the entire group’s market capitalization alone. Its net asset value per share is more than 6 times its current share price.

Our views on the predominantly mass-market European automotive original equipment manufacturers Renault, Stellantis, and Volkswagen are unchanged following a transfer of analyst coverage. We maintain our no moat ratings for all three firms with our fair value estimates reflecting significant upside. We increase our fair value estimate for Renault to EUR 85, while our fair value estimates for Stellantis and Volkswagen decrease to EUR 32 and EUR 264, respectively.

Volkswagen’s group sales growth of 4% in the second quarter was in line with FactSet consensus, largely driven by growth in the financial-services division. However, EPS of EUR 6.21 for the second quarter fell well short of FactSet consensus of EUR 7.17 per share. With our full-year forecast in line with the group’s guidance, we are maintaining our fair value estimates of EUR 352/$38 per share and no-moat rating.

Group sales growth of 4% in the second quarter was in line with FactSet consensus, largely driven by growth in the financial services division. However, EPS of EUR 6.21 for the second quarter fell well short of FactSet consensus of EUR 7.17 per share. With our full-year forecast in line with the group’s guidance, we are maintaining our fair value estimate of EUR 352 per share and no moat rating.

We see Volkswagen as successfully executing a global automotive strategy with one of the most aggressive plans in the industry to switch to battery electric vehicles from internal combustion powertrains. A broad array of brands, serving multiple segments, reduces reliance on any one vehicle category. As one of the world's leading volume producers, Volkswagen's economies of scale from common platforms across a number of models enable cost savings unattainable by smaller competitors.

Amid increasing competition in the nascent market for EVs selling for less than EUR 20,000, we have moderated our 2024 forecast for no-moat Volkswagen's results. As a result, we lowered our fair value estimate for the Europe-listed shares to EUR 346 from EUR 355 and for the US-listed depository receipts to $37.50 from $38 because of slight appreciation of the euro against the dollar.

In our view, Volkswagen is successfully executing a global automotive strategy and has one of the most aggressive plans in the industry to switch to battery electric vehicles from internal combustion powertrains. A broad array of brands, serving multiple segments, reduces reliance on any one vehicle category. As one of the world's leading volume producers, Volkswagen's economies of scale from common platforms across a number of models enable cost savings unattainable by smaller competitors.

In our view, Volkswagen is successfully executing a global automotive strategy and has one of the most aggressive plans to switch to battery electric vehicles from internal combustion powertrains. A broad array of brands, serving multiple segments, reduces reliance on any one vehicle category. As one of the world's leading volume producers, Volkswagen's economies of scale from common platforms across a number of models enable cost savings unattainable by smaller competitors.

No-moat Volkswagen reported first-quarter earnings that reflected a relatively slow start to the year and tough comparisons to a rebounding first quarter in 2023. Overall unit sales came in 2% lower than last year, at 2.1 million vehicles, though with some 30 new and refreshed models to be launched this year, we don't see any reason yet to alter our full-year forecast. We have raised our fair value estimate for the Europe-listed shares to EUR 355 from EUR 351 to reflect the time value of money, and our fair value estimate for the US-listed depository receipts remains $38 per share as currency effects offset the underlying increase.

In our view, Volkswagen is successfully executing a global automotive strategy and has one of the most aggressive plans to switch to battery electric vehicles from internal combustion powertrains. A broad array of brands, serving multiple segments, reduces reliance on any one vehicle category. As one of the world's leading volume producers, Volkswagen's economies of scale from common platforms across a number of models enable cost savings unattainable by smaller competitors.

No-moat Volkswagen reported fourth-quarter earnings per share of EUR 9.31, well above the FactSet consensus estimate of EUR 7.63 and up EUR 6.52 from the EUR 2.79 reported in the same quarter last year. Consolidated revenue rose 14.5% to EUR 87.2 billion from EUR 76.2 billion a year ago, which beat the consensus by 5%, primarily on strong volume. Consolidated deliveries also increased over 14% to 2.5 million in the quarter versus 2.2 million a year before.

No-moat Volkswagen reported third-quarter earnings per share of EUR 7.76, beating the EUR 7.07 FactSet consensus by EUR 0.69 and up EUR 0.63 from the EUR 7.13 reported last year. Consolidated revenue rose 12% to EUR 78.8 billion from EUR 70.7 billion a year ago and 3% higher than consensus. Industrial revenue increased 9% on solid pricing, mix, and volume partially offset by output disruption (chips, logistics, flooding in Slovakia), negative currency effect, while consolidated deliveries increased 14% to 1.5 million versus 1.3 million last year when the chip crunch was worse.

In our view, Volkswagen is successfully executing a global automotive strategy and has one of the most aggressive plans to switch to battery electric vehicles from internal combustion powertrains. A broad array of brands, serving multiple segments, reduces reliance on any one vehicle category. As one of the world's leading volume producers, Volkswagen's economies of scale from common platforms across a number of models enable cost savings unattainable by smaller competitors.

In 2022, battery electric vehicles represented nearly 10% of global auto sales, up from a little less than 6% in 2021. Much of the growth occurred in China, which has been a leader in EV sales over the past decade. However, with national EV subsidies in China expiring in 2022 and far lower sales in the U.S. and Europe, the market questions if EV sales can continue to grow without subsides.

No-moat Volkswagen reported second-quarter earnings per share of EUR 6.48, missing the EUR 7.66 FactSet consensus by EUR 1.18 and down EUR 0.98 from the EUR 7.46 reported last year. Even so, consolidated revenue jumped 15% to EUR 80.1 billion from EUR 69.5 billion a year ago, slightly above consensus by EUR 100 million. Industrial revenue increased 16% on strong pricing, mix, and volume partially offset by continued but lessening chip shortage disruption and negative currency effect, while consolidated deliveries increased 18% to 1.6 million versus 1.3 million last year when the chip crunch was much worse.

In our view, Volkswagen is successfully executing a global automotive strategy and has one of the most aggressive plans to switch to battery electric vehicles from internal combustion powertrains. A broad array of brands, serving multiple segments, reduces reliance on any one vehicle category. As one of the world's leading volume producers, Volkswagen's economies of scale from common platforms across a number of models enable cost savings unattainable by smaller competitors.

We are maintaining our EUR 338 fair value estimate for the ordinary and preferred shares of Volkswagen after management held an investor day to present its new strategic plan to accelerate the transition to e-mobility and digitalization. The company says its steering model is based on profitable value creation over volume growth, lower fixed costs, and disciplined investment. The group executive board will set the financial targets for the brands. However, for the first time, the individual brands will be responsible for developing a performance program, with brand management teams’ compensation including incentives to achieve financial targets. We like that the brands will have more autonomy to execute strategy and more accountability for results.

In our view, Volkswagen is successfully executing a global automotive strategy and has one of the most aggressive plans to transition to battery electric vehicles from internal combustion powertrains. A broad array of brands, serving multiple segments, reduces reliance on any one vehicle category. As one of the world's leading volume producers, Volkswagen's economies of scale from common platforms across a number of models enable cost savings unattainable by smaller competitors.

In our view, Volkswagen is successfully executing a global automotive strategy and has one of the most aggressive plans to transition to battery electric vehicles from internal combustion powertrains. A broad array of brands, serving multiple segments, reduces reliance on any one vehicle category. As one of the world's leading volume producers, Volkswagen's economies of scale from common platforms across a number of models enable cost savings unattainable by smaller competitors.