Stellantis Earnings: Revenue Hit by Strike but Still Up 7% Year Over Year on Price, Mix, and Volume

No-moat-rated Stellantis STLAM reported third-quarter revenue of EUR 45.1 billion, rising 7% from EUR 42.1 billion reported in the prior year, despite the UAW strike. Excluding unfavorable currency, organic revenue rose 14%. The top line beat the FactSet consensus estimate of EUR 43.3 billion by 4%. Stellantis did not give specific figures for the third-quarter impact but did say that the UAW strike resulted in 50,000 lost units for a EUR 3 billion revenue hit and cost less than EUR 750 million in adjusted operating income, cumulatively for September and October. Even though headwinds continue to be substantial, we were impressed that organic revenue growth outpaced volume growth by 3 percentage points as pricing, mix, and volume supported the revenue increase. The automaker (French-domiciled for accounting purposes) discloses only revenue in the first and third quarters.

Management’s largely unchanged 2023 guidance reflects slightly improved volumes above prior guidance in most of its regions, partially offset by lower volumes in South America, and the UAW labor stoppage. The firm forecasts double-digit adjusted operating income margin and positive free cash flow. The CFO commented about margin on the third-quarter call, saying that momentum should be positive through the second half as cost mitigation efforts partially offset strike impact. We estimate 2023 revenue of EUR 184 billion and an AOI margin of 13.3%, which assumes a 12.1% second-half AOI margin, up a hair from 12.0% last year. We remind investors that ratification votes still need to be taken by the UAW for U.S. workers and Unifor for Canadian hourly workers and we remain concerned about economic softness in major auto markets, geopolitical turmoil, supply chain disruption, and inflationary cost pressures. The 5-star-rated shares of Stellantis on Oct. 31 traded at a compelling 55% discount to our unchanged EUR 39 fair value estimate.