Stellantis‘ (STLA -1.93%) The earnings report is impressive, one that belies its reputation. Consider this: It’s cheap, pays a strong dividend, and has good future prospects. Investors underestimate the company’s CEO, Carlos Tavares, who is delivering strong results.
Need proof? Check out the latest earnings report; it is impressive.
In 2022, Stellantis generated operating income of $24.4 billion; That’s a significant increase from 2021, when the company made $19 billion. Margins increased just over a percentage point to 13.2%.
The company has crowned Tesla‘s 2022 operating profit of $13.6 billion as well General Motors‘ 14.3 billion dollars and fordThat’s $10.4 billion. Margins also topped GM’s at 11.3% and Ford’s at 6.6%. Only Tesla reported higher margins in 2022, at 16.7%.
Understandably, the company doesn’t get the credit it deserves as the components that make it up weren’t exactly a killer investment. Both Fiat Chrysler Automobiles and the PSA Group survived only through the generosity of government bailouts in the United States and France, respectively. But the newly combined company is in far better shape under CEO Carlos Tavares, as all regions around the world report rising revenue. But the Stellantis divisions had a strong reputation that hung like a dark cloud over the newly formed company. As a result, Stellantis is trading at 2.6 times earnings versus 6.3 for General Motors, 5.2 for Ford and 10 for Toyotaand 54 for Tesla.
Along the road
The company also announced a share buyback of up to 1.5 billion euros ($1.6 billion) and will pay a dividend of 1.34 euros ($1.41) per share, up from 1.04 euros ($1.10) in 2021.
Stellantis was formed two years ago through the merger of Fiat Chrysler Automobiles and the French PSA group. The company’s broad product range is reflected in its many brands, including Abarth, Alfa Romeo, Chrysler, Citroën, Dodge, DS Automobiles, Fiat, Jeep, Lancia, Maserati, Opel, Peugeot, Ram and Vauxhall. While some brands like Jeep have a global reach, most are strong regional players, including regions like Europe and South America.
Stellantis reported that it surpassed its target of €5 billion (US$5.3 billion) in cost synergies at the time of the merger by a substantial amount over the past year and realized €7.1 billion (7. 5 billion US dollars). But semiconductor shortages and logistical bottlenecks led to a 2% decline in vehicle shipments last year.
Still, the company is tackling some of the issues that are worrying investors, most notably its slow transition to electric vehicle production.
Like Toyota, Stellantis is moving into electrification with both hybrid electric vehicles (HEVs) and battery electric vehicles (BEVs). The company has started production of the Jeep Avenger for the European market, Jeep’s first BEV. While most of the company’s electric vehicles are HEV, sales increased 41% last year to 288,000 vehicles, including the Jeep Wrangler, Jeep Grand Cherokee, Ram 1500 and Chrysler Pacifica hybrids. That’s enough to call it one of the top auto stocks of 2023.
It also reinforces the fact that This makes for a good long-term purchase.
In fact, his Jeep Wrangler 4xe is America’s best-selling plug-in hybrid. And order has begun for Stellantis’ first electric vehicle for the US market, the Ram 1500 REV, with more models to come for the 2024 model year.
Given that only 10% of global new car sales are EVs, there’s still plenty of time for Stellantis to get in the game.
And the automaker is developing an exclusive EV platform for its future EVs and establishing battery manufacturing joint ventures, much like its competitors. Stellantis is targeting global revenue growth for the next year and expects to generate positive free cash flow and double-digit operating margin.
While that doesn’t mean that Stellantis’ stock price will go up, it does mean that you’re getting a lot for the money that makes it worth buying.
Larry Printz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends General Motors and recommends the following options: long January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy.
