Continental Earnings: Near-Term Headwinds Don't Change Long-Term Outlook

Narrow-moat Continental reported fourth-quarter 2023 results that were below FactSet consensus expectations, missing sales by 1.5% and earnings per share by 42%. Nonetheless, we are constructive on the results, as the company capped off a difficult year by achieving fourth-quarter sales growth of 1.3% and adjusted operating income growth of 68.9% despite persistent supply chain constraints, inflation, and geopolitical uncertainties. We believe Continental’s results provide evidence that management is on the right path to achieve its previously outlined midterm financial targets. We reiterate our EUR 163 fair value estimate, which represents a 128% premium over the current share price.