Continental Earnings: Despite Other Industry Headwinds, Results Improving as Chip Crunch Lessens

Narrow-moat-rated Continental reported first-quarter earnings per share EUR 1.91, trouncing the EUR 1.14 FactSet consensus EPS by EUR 0.77 and EUR 0.68 better than a year ago as the chip shortage lessened. Consolidated revenue beat consensus by 3%, increasing 11% to EUR 10.3 billion from EUR 9.3 billion last year. Excluding positive currency effect, organic revenue increased 10%. Automotive organic revenue jumped 17%, outperforming a 10% increase in global light-vehicle production by 7 percentage points thanks to new business, increased customer production, and raw material customer price recoveries. Tire organic revenue rose 5%, even though volume slumped 9%, due to pricing and mix. ContiTech organic revenue rose 8% mostly on non-auto pricing but also on automotive volume growth. The 5-star-rated shares of Continental currently trade at a compelling 59% discount to our unchanged EUR 159 fair value estimate.