Continental AG Reports First Quarter Profit Amid Sales Drop

Continental AG has reported a profit for the first quarter, a significant recovery from last year's loss, despite lower sales. This positive trajectory in earnings is notable against a backdrop of declining automotive production.

Date: 06-05-2025

AI Rating: 7

Continental AG's report demonstrates a marked improvement in its earnings performance, shifting from a net loss of 53 million euros last year to a net income of 68 million euros for the first quarter. This positive change is reflected in the Earnings Per Share (EPS), which reached 0.34 euros, a significant turnaround from the loss of 0.27 euros last year.

Revenue Analysis
Despite the net income gain, consolidated sales saw a slight decline of 0.8%, totaling 9.707 billion euros. This drop raises concerns over revenue growth as the firm faces challenges in the automotive production sector. The involvement of a spin-off also introduces uncertainty into future earnings potential.

Profit Margins
The adjusted EBIT has also shown significant improvement, increasing to 639 million euros with a margin of 6.6%, up from 201 million euros and a margin of 2.1% the previous year. Without IFRS 5 application, adjusted EBIT would still represent commendable growth.

Future Outlook
Continental’s management provided an optimistic outlook for fiscal 2025, estimating sales for continuing operations in Tires and ContiTech between 19.5 billion euros to 21.0 billion euros and an improved adjusted EBIT margin of 10.5% to 11.5%. However, caution is warranted as this outlook does not incorporate potential impacts from future trade restrictions, which could pose risks to revenue.

Considerations for Investors
While the company has made substantial gains in net income and profit margins, the decline in sales raises questions about growth sustainability. Investors may need to weigh these factors carefully when assessing the stock for a holding period of 1 to 3 months.

Stocks: CTTAY