On Friday, CFRA adjusted its financial outlook for Valeo (EPA:VLOF) SA (FR:FP) (OTC: VLEEY (OTC:VLEEY)), increasing the 12-month price target to €12.00 from the previous €11.00, while the Hold rating remains unchanged. The revised target is based on a price-to-earnings (P/E) ratio of 8.9x for 2024, a figure that stands below the peer average forward P/E of 12.0x. The discount is attributed to Valeo's comparatively lower margins.
In the first quarter of 2024, Valeo reported sales of €5.4 billion, aligning with consensus estimates from S&P Capital IQ. The company experienced a like-for-like sales growth of 2%, primarily fueled by the original equipment segment, which saw a 1% like-for-like increase and constituted 84% of the total Q1 sales. Moreover, the traditional Powertrain activities witnessed an 8% like-for-like growth, propelled by increased production for European automakers.
Despite the positive performance in the first quarter, CFRA remains cautious about Valeo's future, reaffirming its guidance for 2024 but acknowledging the challenging conditions in the automotive industry. The firm notes that car parts manufacturers are grappling with a slowdown in auto production, resulting in excess capacity issues for suppliers.
Valeo's performance in specific sectors was mixed, with the traditional Powertrain activities showing significant growth, while high-voltage electrification for certain electric vehicle platforms, particularly in Europe, faced a downturn. This dynamic points to the varied demand across different segments of the automotive market.
The outlook for Valeo and similar companies in the automotive supply chain remains uncertain due to industry-wide difficulties. Suppliers are navigating through various challenges, including the impact of production slowdowns on capacity and profitability.
InvestingPro Insights
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Current data from InvestingPro shows a market capitalization of $3.01 billion and a P/E ratio of 12.73, which adjusts to a more favorable 10.17 when considering the last twelve months as of Q4 2023. This suggests a more attractive valuation compared to the CFRA's target P/E ratio of 8.9x for 2024.
InvestingPro Tips highlight Valeo's high shareholder yield and a consistent track record of raising dividends, with an increase for the past 4 consecutive years and maintained dividend payments for 14 consecutive years.
This points to a stable return for investors, despite the company's weak gross profit margins, which could be a factor in the discounted P/E ratio applied by CFRA. Analysts on InvestingPro also predict the company will be profitable this year, supported by a profitability streak over the last twelve months.
Revenue growth remains robust, with a 10.02% increase over the last twelve months as of Q4 2023, and a dividend yield as of the latest data stands at 2.56%. For investors looking to delve deeper into Valeo's financials and future prospects, there are 6 additional InvestingPro Tips available, which could provide further insights into the company's performance and industry standing.
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