Analyst Note| Richard Hilgert |
Narrow-moat-rated Continental reported fourth-quarter earnings per share before special items of EUR 1.05, missing the FactSet consensus by EUR 0.13, but is EUR 0.29 better than a year ago as the chip shortage improves. Consolidated revenue beat consensus by 3%, increasing 17% to EUR 10.3 billion from EUR 8.8 billion last year. Excluding positive currency effect, organic revenue increased 12%. Automotive organic revenue jumped 18%, outperforming a 5% increase in global light vehicle production by 13 percentage points thanks to new business and raw material customer price recoveries. Tire organic revenue rose 12% on pricing, while ContiTech also increased 12% mostly on nonauto pricing and volume growth. The time value of money added EUR 4, making our new fair value estimate EUR 150, up from EUR 146. The 5-star-rated shares of Continental currently trade at a compelling 48% discount to our fair value estimate.