Company Reports

We will discontinue analyst coverage of Vitesco on or about April 22 We provide analyst research and ratings on over 1,500 companies globally and periodically adjust our coverage according to investor interest and staffing.

Narrow-moat-rated Vitesco reported fourth-quarter loss per share of EUR 1.56, below the EUR 2.44 FactSet consensus and last year's EUR 0.29. The primary reason for this reported loss included an unusually large tax burden due to accounting effects that pertain to the planned merger with Schaeffler AG. Consolidated revenue fell below EUR 2.3 billion from above EUR 2.3 billion a year ago and was 3% lower than consensus. Excluding currency headwinds, organic revenue rose 1% versus a 9% increase in global light vehicle production. Core organic revenue, excluding wind-down business lines, increased 6.2%, which also underperformed the market.

Narrow-moat-rated Vitesco announced the signing of a business combination agreement with Schaeffler, and that its executive and supervisory boards support the agreement and the increased tender offer price of EUR 94, up from the previous EUR 91 (see our Oct. 9 note). However, the company’s “Joint Reasoned Statement of the Executive Board and the Supervisory Board,” says that three investment banks and the supervisory board found that the EUR 94 offer price is “inadequate from a financial point of view.” The board reasoned that, “in the current market environment, the tender offer provides a potentially attractive exit opportunity for risk-averse investors or investors seeking a short-term investment.”

On Oct. 9, 2023, Schaeffler AG announced a tender offer at EUR 91 per share for the outstanding shares of Vitesco. On Nov. 27, 2023, the tender offer was increased to EUR 94. We do not believe there will be a competing offer or that there will be any antitrust issues as there are several auto suppliers within the e-mobility drivetrain space and given that the Schaeffler family has 58.94% voting control of of Vitesco. Our company report reflects Vitesco as on a standalone basis.

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.

On Oct. 9, 2023, Schaeffler AG announced a tender offer at EUR 91 per share for the outstanding shares of Vitesco. We do not believe there will be a competing offer or that there will be any antitrust issues given that the Schaeffler family has 49.9% voting control of of Vitesco as well as control of several auto suppliers within the e-mobility drivetrain space. Our company report reflects Vitesco as on a standalone basis.

Schaeffler AG announced that it will initiate a public tender offer for the outstanding shares of narrow-moat Vitesco at EUR 91 per share. The offer represents a 21% premium to the previous closing price and 20% premium to the 3-month average volume-weighted share price. Our fair value estimate had been EUR 113 but, with our high certainty that the acquisition will occur, our new fair value estimate is EUR 91. As a result, 3-star-rated Vitesco's stock currently trades roughly in line with our new fair value.

On Oct. 9, 2023, Schaeffler AG announced a tender offer at EUR 91 per share for the outstanding shares of Vitesco. We do not believe there will be a competing offer or that there will be any antitrust issues given that the Schaeffler family has 49.9% voting control of of Vitesco as well as control of several auto suppliers within the e-mobility drivetrain space. Our company report reflects Vitesco as on a standalone basis.

Narrow-moat rated Vitesco reported second-quarter earnings per share before special items of EUR 1.15, EUR 0.07 better than the EUR 1.08 FactSet consensus and up EUR 0.73 from last year’s EUR 0.42 when the chip shortage was much worse. Due to less sporadic customer production from the chip crunch, the launch of new business, cost recoveries from customers, partially offset by non-core business wind-downs and continued supply chain disruption, consolidated revenue increased 13% to EUR 2.44 billion from EUR 2.17 billion a year ago, about EUR 14 million above consensus. Excluding favorable currency, organic revenue was 14% higher versus a 16% increase in global light vehicle production. However, core organic revenue, excluding wind-down businesses, increased 24%, outperforming the market by 8 percentage points.

We believe Vitesco Technologies will capitalize on vehicle electrification arising from global clean air regulation. Vitesco’s products are used in internal combustion engines, hybrid electric, battery electric, and fuel cell electric vehicles. The company's electrified vehicle powertrain product lines should support revenue growth in the mid-single-digit range, despite declining noncore ICE product lines. The company benefits from its ability to continuously innovate, a global manufacturing footprint, highly integrated long-term customer ties, high customer switching costs, and moderate pricing power from new technologies.

Narrow-moat-rated Vitesco Technologies reported first-quarter earnings per share before special items of EUR 0.29, well below the EUR 0.71 FactSet consensus EPS but EUR 0.38 higher than last year’s EUR 0.09 loss per share. Thanks to less sporadic customer production from the chip crunch and the launch of new business, partially offset by noncore business wind-downs, consolidated revenue increased 3% to EUR 2.31 billion from EUR 2.26 billion last year, about even with consensus. Excluding favorable currency, organic revenue edged 1% higher versus a 6% increase in global light-vehicle production. Core organic revenue, excluding wind-down businesses, increased 8%, outperforming the market as the first quarter last year was hit harder by the chip crunch.

We believe Vitesco Technologies will capitalize on vehicle electrification arising from global clean air regulation. Vitesco’s products are used in internal combustion engines, hybrid electric, battery electric, and fuel cell electric vehicles. The company's electrified vehicle powertrain product lines should support revenue growth in the mid-single-digit range, despite declining noncore ICE product lines. The company benefits from its ability to continuously innovate, a global manufacturing footprint, highly integrated long-term customer ties, high customer switching costs, and moderate pricing power from new technologies.

We believe Vitesco will capitalize on vehicle electrification arising from global clean air regulation. Vitesco’s products are used in internal combustion engines, hybrid electric, battery electric, and fuel cell electric vehicles. The company's electrified vehicle powertrain product lines should support revenue growth in the mid-single-digit range, despite declining noncore ICE product lines. The company benefits from its ability to continuously innovate, a global manufacturing footprint, highly integrated long-term customer ties, high customer switching costs, and moderate pricing power from new technologies.

Narrow-moat-rated Vitesco reported fourth-quarter earnings per share before special items of EUR 2.29, well above the EUR 1.45 FactSet consensus EPS and EUR 0.66 higher than last year's EUR 1.63 EPS. Due to less-sporadic customer production from the chip crunch, consolidated revenue jumped 15% to EUR 2.3 billion from EUR 2.0 billion last year but was 2% lower than consensus. Excluding favorable currency, organic revenue rose 10% versus a 12% increase in global light vehicle production. However, core organic revenue, excluding wind-down business lines, increased 15%, outperforming the market as the fourth quarter last year was hit harder by the chip crunch.

We believe Vitesco will capitalize on vehicle electrification arising from global clean air regulation. Vitesco’s products are used in internal combustion engines, hybrid electric, battery electric, and fuel cell electric vehicles. The company's electrified vehicle powertrain product lines should support revenue growth in the mid-single-digit range, despite noncore ICE product lines which are declining. The company benefits from its ability to continuously innovate, a global manufacturing footprint, highly integrated long-term customer ties, high customer switching costs, and moderate pricing power from new technologies.

Narrow-moat Vitesco reported a third-quarter loss per share of EUR 0.34, well below the EUR 0.02 loss per share FactSet consensus, but EUR 1.94 higher than last year’s pro forma result (Vitesco was spun-off from Continental in September 2021). Due to less sporadic customer production from the chip crunch, consolidated revenue jumped 20% to EUR 2.3 billion from EUR 1.9 billion last year and beat consensus by 1%. Excluding favorable currency, organic revenue rose 14% versus a 28% increase in global light vehicle production. However, core organic revenue, excluding wind-down business lines, increased 23%, underperforming the market as fourth quarter last year was hit harder by the chip crunch. The firm expects to significantly beat the market in the fourth quarter this year.

We believe Vitesco will capitalize on vehicle electrification arising from global clean air regulation. Vitesco’s products are used in internal combustion engines, hybrid electric, battery electric, and fuel cell electric vehicles. The company's electrified vehicle powertrain product lines should support revenue growth in the mid-single-digit range, despite noncore ICE product lines which are declining. The company benefits from its ability to continuously innovate, a global manufacturing footprint, highly integrated long-term customer ties, high customer switching costs, and moderate pricing power from new technologies.

In a capital markets day presentation to investors, narrow-moat-rated Vitesco substantially increased its revenue targets from customers’ electrified vehicle, or EV, programs. As a result, we increased our 2022 estimated revenue from EUR 8.6 billion to EUR 8.8 billion and our annualized revenue growth rate assumption from 4% to 5% during our 10-year Stage I forecast. Consequently, we raised our fair value estimate to EUR 102 from EUR 89, with EUR 12 of the increase from higher revenue plus EUR 1 due to the time value of money. The 4-star-rated shares of Vitesco trade at an attractive 47% discount to our new fair value.

We believe Vitesco will capitalize on vehicle electrification arising from global clean air regulation. Vitesco’s products are used in internal combustion engines, hybrid electric, battery electric, and fuel cell electric vehicles. The company's electrified vehicle powertrain product lines should support revenue growth in the mid-single-digit range, despite noncore ICE product lines which are declining. The company benefits from its ability to continuously innovate, a global manufacturing footprint, highly integrated long-term customer ties, high customer switching costs, and moderate pricing power from new technologies.

Narrow-moat-rated Vitesco reported second-quarter earnings per share of EUR 0.92, well ahead of the EUR 0.01 loss per share FactSet consensus estimate by EUR 0.93 and EUR 0.92 higher than the year-ago pro forma result (Vitesco was spun off from Continental in September 2021). Despite sporadic customer production from the chip shortage, the Ukraine crisis, and China COVID-19 lockdowns, consolidated revenue increased 3% to EUR 2.2 billion from EUR 2.1 billion last year and beat the consensus by 2%. Excluding favorable currency, organic revenue declined 1% versus flat global light vehicle production. However, core organic revenue, which excludes wind-down business lines, increased 3%, outperforming the market due to new business launches and price increases to recover elevated costs.