Shares of French carmaker Renault, trading in Paris, crashed the most since the early days of the Covid pandemic after the company issued an unscheduled release, warning of lower profits for the year amid slumping demand and fierce competition from Chinese carmakers like BYD Motors.
Renault stated in the release that it had lowered its operating margin forecast for the year to around 6.5%, down from at least 7% previously. It also cut its free cash flow estimate to between 1 billion euros and 1.5 billion euros, down from 2 billion euros.
It stated that first-half volumes were lower than expected, as the retail market continues to soften, and added that inventories have swelled.
Renault slashed its full-year forecast:
Renault's preliminary H1 results:
The revised guidance underscores Europe's sluggish car market and the competitiveness of Chinese manufacturers, such as BYD, which are flooding the continent with vehicles and putting increased pressure on domestic brands.
In Paris, Renault shares crashed 17%, the largest daily decline since early March 2020.
And shares are at their lowest point since 2024.
Commenting on the shock profit warning, UBS analyst Justinus Steinhorst told clients:
Renault contributes 60% to the selloff in Autos on the day with the UBS Autos basket {UBXEAUTO} down 2.4% after issuing a profit warning.
Here's what other top desks are saying (courtesy of Bloomberg):
Oddo (outperform, PT to €55 from €60)
Analyst Michael Foundoukidis says it's a stark warning and unfortunate timing after CEO departure, leading them to cut their estimates by 10%
"The release suggests an awful June which will likely raise fears around the visibility in the new guide," he adds
Says stock will likely be seen as "dead money near term" at least pending new CEO
Morgan Stanley (equal-weight)
Analyst Javier Martinez de Olcoz Cerdan says while Renault is the first auto OEM to cut its guidance, the factors behind this profit warning will likely drive more cuts across the sector
Guidance implies about 7% cut to consensus Ebit for FY25, with Renault impacted by further commercial pressures
2Q may be bottom of the cycle if tariffs normalize, but if not there is further downside risk to margins and performance
Citi (buy)
Commercial pressure in Europe adds to broader headwinds from tariffs and pricing pressures, which Renault had until now been managing better than many peers, analyst Harald Hendrikse writes
While the stock does already discount some of the concerns, investors may be wondering if margins are peaking at a time when wider SXAP margins are nearing a trough
Appointment of a CEO may be seen as a positive "when the dust settles"
JPMorgan (overweight)
Analyst Jose Asumendi says preliminary 1H Ebit 13% below consensus expectations, impacted by volume miss, commercial pressures and higher receivables due to timing impacts
Notes that Renault does expect some improvement in 2H, and that several launches are scheduled
Will be crucial for Renault to provide clarity on permanent CEO succession
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