PARIS, July 6 (Reuters) – Faurecia fell on the stock market on Wednesday morning as Michelin rose after a series of changes in Barclays’ recommendation, which the bank justified by the deterioration of the outlook for the European car market.
Faurecia shares lost 4.98% around 10:15 a.m., one of the biggest drops in the Parisian broad SBF 120 index, which was up 1.61%. At the same time, Michelin gained 2.72% and Valeo dropped 1.11%.
“Rising recession signals, geopolitical instability and the ongoing resurgence in COVID-19 cases are significantly clouding the automotive landscape in Europe,” Barclays analysts wrote.
They believe that the sector “is now on the path to a much slower volume recovery in a still difficult environment of rising inflationary pressures on costs (especially wages) and increased capital expenditure”.
Their operating margin forecast for the industry in 2023 is now 60 basis points below consensus, they say, and their free cash flow forecast is more than 10% lower.
Barclays lowered its recommendation on Faurecia by two notches, to “underweight” against “overweight”, judging that the current context, unfavorable to deleveraging after the takeover of the German Hella, “does not place Faurecia in a position to buy the minority shareholders of Hella in the near future without a further injection of capital”.
The bank reduced its opinion of Valeo from “overweight” to “line weight”.
On the other hand, it raised its recommendation on Michelin, to “overweight” against “online weighting”, judging that the group’s ability to increase its prices, its resilience in terms of results and cash flow as well as its valuation offer “the best how to navigate these troubled times”.
Barclays finally goes from “underweight” to “online weighting” on the German Continental, which gained 1.85% in Frankfurt.
(Writing by Marc Angrand, editing by Kate Entringer)