Stellantis (STLA) stock fell on Tuesday as the company reported first-quarter sales and deliveries that fell from a year ago, just as a number of new vehicles are set to arrive in showrooms later this year.
The Big Three automaker – which has a more European-focused product portfolio compared to rivals such as GM and Ford – reported revenue of $44.54 billion, down 12% from a year ago.
In the conference call, Chief Financial Officer Natalie Knight said this was “due to changes in product offerings, inventory management, regional mix and foreign exchange impacts.” Shipments also fell 10% to 1.335 million worldwide as Ram- , Jeep and Fiat parent company said low inventories and low supply kept deliveries low, but the company said new products would replace discontinued models, leading to an increase in deliveries in the second quarter.
Stellantis does not report financial results for the first and third quarters, but only reports first half and full year results to investors. Although the automaker reaffirmed its full-year 2024 forecast for double-digit adjusted operating income and Knight claimed it would be in the low teens, Stellantis shares fell 10% in midday trading and are up 3% for the year.
Apparently, investors and analysts were not reassured by the fact that Stellantis expects an improvement in shipments for the second quarter compared to the first half, an increase in sales and stronger industrial free cash flow in the second half of the year compared to the first half. Stellantis also said lower deliveries in the first quarter were a good thing, suggesting it was “not a repeat.” [the] Inventory build-up in the first quarter of 2023.”
However, with 25 new models on the way, there are concerns that inventory levels could build up and lead to price reductions that ultimately weigh on margins.
“Concern over STLA’s bloated inventory is one of the main reasons we lowered our rating to Hold last month,” CFRA analyst Garrett Nelson told Yahoo Finance. “In its key market of North America, STLA’s Jeep, Dodge, Ram, Fiat and Alfa Romeo brands all have the highest inventory levels of any OEM brand.” Following the first-quarter earnings release, Nelson lowered his price target on the stock from $30 to $24.
Nelson also points to a previous analysis in which the CFRA team said it viewed Stellantis as an automaker that may need to “further increase incentives and take other actions to better balance supply and demand.”
Regarding pricing, Knight said Stellantis was “able to lower our MSRPs and incentives, so we saw a very, very stable net price in the quarter” and believes the new products will generate “excitement” and sales the second half of the year. And the company has found success with plug-in hybrid electric vehicle sales, which rose nearly 80% in the quarter, with EV sales up 8%, albeit on low volume.
Investors will be eager to see whether new product offerings, including range-extending electric and hybrid versions of the popular Ram pickups, will actually help Stellantis succeed later this year.
Pras Subramanian is a reporter for Yahoo Finance. You can keep following him Twitter and further Instagram.
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