Stellantis (STLA) & Employee Stock Ownership
Perspectives, by Mark Robertson, Managing Partner November 1st, 2024
Based on the long-term perspective and outlook for the company, the employee stock ownership offer appears quite attractive.
Stellantis (STLA) traces its history back to 1899. Its current configuration was created in 2021 when Peugeot S.A. merged with and into Fiat Chrysler Automobiles N.V.
Stellantis designs, engineers, and manufactures automobiles and light commercial vehicles, as well as engines and transmissions worldwide. Provides parts and services, along with retail and dealer financing, leasing, and rental services. Has 14 brands, incl. Alfa Romeo, Citroen, Dodge, Fiat, Jeep, Maserati, Ram, and Peugeot. Has operations in more than 30 countries.
The Offer: Stellantis Broadens Employee Share Purchase Plan to Nearly Entire Global Workforce
Source: Company Press Release
- Opportunity for more than 230,000 employees to become shareholders on preferential terms: 20% discount on the share price and a matching contribution of 100% of the personal amount invested, up to €1,000.
- Strong incentive for employees to share in the creation of value, supporting the Stellantis ambition to reach an initial threshold of 5% of capital held by its employees.
Equity (Business Model) Analysis
Conclusions & Observations
- The current economic environment is challenging. Yes, that’s sugar-coated. But the Big Three are familiar with these cycles and they’re very precedented. Note the downdraft in 2024 sales but the longer term restoration to the trend that is consistent with conditions at Ford & General Motors. Also note the current profitability pressures.
- That said, the Stellantis balance sheet compares favorably with the best in industry (e.g. Toyota and Honda) and the general business is outlook is fairly strong.
- Stellantis proceeded more cautiously into the EV conversion despite the ridicule from many at the time and this strategy may ultimately prove to have been most prudent.
- Also noted is the fact that the stock price has languished while the general stock market surges.
- The bottom line is that at the current stock price levels, the return forecasts are in the 20% range from a variety of sources.
Value Line Close (11/8/2024)
Sales and earnings comparisons will likely show improvement in the second half. Performance should be helped along by the launch of the Dodge Charger Daytona and Jeep Wagoneer S in North America. Meanwhile, the Enlarged Europe segment will get a boost from the all-new Citroen C3 (for which Stellantis had orders for 50,000 units) and Peugeot 3008 (80,000 ordered). Altogether, we look for full-year revenues to come in around $198.6 million, which would make for a nearly 5% decline. Meanwhile, we estimate that earnings will be down about 29%, to $4.65 per share. For next year, we continue to forecast that earnings will make up about 5%-7% of lost ground. (Note: The company was due to announce third-quarter shipments and revenues shortly after we went to press. Earnings are reported semi-annually.)
These shares are down about 20% since our August report. Although upside potential over the 18-month and 3- to 5-year spans is above average, the issue is also likely to exhibit higher volatility. — Mario Ferro