Continental has raised its full-year profit forecast for the second time in five months after second quarter earnings rose on improving vehicle demand and a strong performance by its rubber division.
The supplier is now targeting a margin on adjusted earnings before interest and tax (EBIT) of about 11%, after raising the guidance to at least 10.5% in March from a previous 10%, Conti told Reuters.
Go deeper with GlobalData
But analysts told the news agency the new guidance may not reflect the company’s full earnings potential.
“Conti is typically regarded as being conservative in its guidance,” analysts at Citigroup said in a note, adding that the market expected a full-year operating margin of 11.5%.
Adjusted EBIT rose 2.6% in the second quarter to 1.005 billion euros, in line with a EUR1.006bn consensus forecast in a Reuters poll of analysts.
EBIT growth outpaced sales, which fell 0.15% during the quarter, thanks to lower raw material costs and stronger profitability at the rubber division.
Continental said a shift in economic momentum in emerging markets, exacerbated by geopolitical tensions in the Middle East, Russia and Ukraine, would hit sales and intensify currency headwinds even though European sales had risen modestly.
Continental expects a negative currency effect of about EUR1bn, up from EUR700m previoulsy, limiting full-year profit to about EUR34.5bn compared with March guidance of about EUR35bn the report noted.
