Stocks witnessed an upward surge on Thursday, largely driven by the strong performance of automaker shares.
The positive momentum was sparked by Renault’s substantial dividend increase following a surge in sales, along with Stellantis revealing a €3 billion share repurchase scheme.
Renault, listed on the Paris Stock Exchange (RNO), announced a net profit of €2.315 billion ($2.48 billion) for 2023, marking a notable turnaround from the €716 million loss reported in 2022.
While the net profit missed analysts’ expectations of around €2.62 billion, factors such as losses from the disposal of a stake in Nissan tempered the results. Nonetheless, other positive aspects bolstered investor confidence.
The company saw a significant 9% rise in global sales volumes, reversing a trend of four consecutive years of declines.
Operating margins also showed substantial improvement, increasing from 5.5% in 2022 to 7.9% in the past year. In a strategic effort to boost efficiency, Renault’s CEO, Luca de Meo, streamlined the number of models the company manufactures.
Consequently, the proposed dividend soared to €1.85 per share, marking a significant jump from the €0.25 offered in the previous year.
Renault’s shares experienced a commendable increase of over 6% to €40.08, despite enduring an 8% decline over the preceding 12 months.
Analyst Pierre-Yves Quemener from Stifel conveyed optimism regarding Renault’s potential for additional margin expansion, rating the shares as a buy and establishing a price target of €53.
He emphasized the company’s substantial net cash of €3.7 billion and the remaining €4 billion in Nissan shares yet to be monetized. Quemener suggested that the current market valuation of €11 billion seems undervalued and justifies a re-rating.
Simultaneously, Stellantis, the multinational automaker renowned for brands like Alfa Romeo, Chrysler, Citroën, Fiat, Jeep, and Peugeot, observed its shares (STLA) climb by 4% to a record high.
This upswing followed the announcement of a €3 billion share repurchase program for 2024 and a proposal to increase the dividend by 16% to €1.55 per share.
Despite setbacks such as strikes at North American plants impacting second-half 2023 operating profits, which declined by 10% to €10.2 billion, Stellantis CEO Carlos Tavares acknowledged potential challenges in 2024 but anticipated revenue support from various factors.
The favorable developments at Renault and Stellantis had a ripple effect, uplifting other companies in the automotive sector. This collective optimism propelled the STOXX Europe 600 Automobiles & Parts Index (SXAP) by 1.7%.
In a broader context, the positive sentiment in European markets mirrored Wall Street’s rebound overnight and was reinforced by stronger U.S. futures on Thursday.
The CAC 40 in Paris (FR: PX1) climbed by 0.7%, Frankfurt’s DAX (DX: DAX) gained 0.6%, while London’s FTSE 100 (UK: UKX) remained relatively unchanged, influenced by weakness in energy majors BP and Shell amid declining oil prices.
