STLA - Stellantis: Investors Can Expect A Strong Profit Margin And Equity Yield In 2024

2024-02-19 07:01:36 ET

Summary

• Stellantis reported strong Q4 and 2023 results, with revenues and net income up 6% and 12%, YoY respectively.
• For 2024, management sees supportive commercial and macroeconomic momentum, likely leading to a double-digit operating margin on a €190+ billion topline.
• The company plans to distribute €7.7 billion in cash to shareholders, representing a 16% increase from the previous year and implying an 11% yield.
• Stellantis' stock has significant potential for a multiple rerating; and I reiterate my Strong Buy rating with a $48/ share target price.

Stellantis ( STLA ) stock is trading higher after the automaker reported strong Q4 and FY 2023 results, while highlighting a commitment to achieve "at least a double-digit adjusted operating income margin in 2024", on a €190+ billion topline expectations. In addition, Stellantis management delighted with the projection to distribute a yield-rich €7.7 billion of cash to shareholders, up about 16% from the €6.6 billion distributed in 2023. Looking at the broader automotive sector as we move into 2024, I argue that sentiment towards OEMs like Stellantis should improve, as interest rates fall and global consumer demand for higher-priced capital goods is projected to strengthen. Moreover, I view fears related to the disruption from electric vehicles as overly exaggerated. The shift towards EVs is expected to be incremental, with a complete transition remaining uncertain. In any case, Stellantis increasingly looks to be in a strong position to meet both existing ((ICE)) and emerging consumer demands (BEV), ensuring sustained profitability in the forthcoming years....

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