Vitesco Earnings: Mixed Results but for the Right Reason, Maintains Full-Year Guidance

Narrow-moat-rated Vitesco reported third-quarter earnings per share before special items of EUR 0.97, EUR 0.09 below the EUR 1.06 FactSet consensus but up EUR 1.31 from last year’s EUR 0.34 per share loss as supply chain disruption and inflationary cost pressures persisted but eased year over year. Due to significant planned ramp-down in noncore revenue and unfavorable currency translation, consolidated revenue dipped 4% to EUR 2.2 billion from EUR 2.3 billion a year ago, but 5% below consensus. We think the miss was due to a 23% drop in noncore revenue, which in previous quarters was declining by mid-single-digit rates. Excluding unfavorable currency, organic revenue was 1% higher versus a 3% increase in global light vehicle production. However, core organic revenue, excluding noncore, increased 5%, outperforming the market by 2 percentage points.