Barclays softens view on European auto suppliers, though tariff risks remain
03/12/2024 10:01
** Barclays turns less negative on European auto suppliers,
saying the sector is close to record valuation lows with a sharp
earnings reset in sight
** "2025 could be a vintage year to emerge from the multi
year tunnel Auto suppliers have been through post Covid,"
Barclays says
** However, it notes that growing tariff risks and the
Volkswagen strikes show the industry is not out of the woods yet
** "It is clear that 25% blanket US/Mexico tariff risk is
not fully priced" - Barclays
** It downgrades Gestamp GEST.MC to "equal weight" from
"overweight", citing increasing risks around its North America
turnaround and EV-related investment ramp-up
** It notes Mexico tariffs could jeopardise Gestamp's plan
of moving its U.S. Edscha production there
** It favours "overweight"-rated Continental CONG.DE and
Forvia FRVIA.PA , which it says are becoming "progressively
more investable", over Valeo VLOF.PA ("equal weight") and
Michelin MICP.PA ("underweight")
** It also reiterates "overweight" on Dowlais DWL.L and
says its accelerating cost saving initiatives should support
faster FCF generation and deleveraging
(Reporting by Tiago Brandao)
((Tiago.Brandao@thomsonreuters.com;))