Stellantis shares surged on Wednesday following the automaker's announcement of its third-quarter financial results, which revealed progress in its ambitious 60 billion euro turnaround plan. The European car giant reported a 1% increase in revenues, reaching 37.6 billion euros, compared to the same period last year. Additionally, its adjusted operating income saw a significant rise, climbing 184% to 256 million euros from 90 million euros a year earlier.
The company's industrial free cash flow improved, albeit remaining negative at 4 billion euros, compared to negative 4.3 billion euros previously. Investors were reassured as Stellantis reaffirmed its 2026 guidance and its aim to achieve positive free cash flow by next year, a critical target for stakeholders.
RBC Capital Markets analyst Tom Narayan noted that while the third quarter was soft, expectations were lower, and the maintenance of the 2026 guidance was a positive signal, especially as other automakers face challenges from rising costs. Stellantis' stock responded positively, climbing approximately 9% in Milan and rising in early New York trading, although it remains down for the year.
CEO Antonio Filosa expressed confidence in the company's progress, stating that Stellantis is ahead of schedule in its turnaround plan, which was unveiled in May. He highlighted that the company expects to surpass its cost-cutting target of 6 billion euros by 2028, with 2.4 billion euros in savings anticipated by 2027.
"We are very confident in reaffirming our '26 guidance. Those include '27 free cash flow positive, " Filosa assured investors, addressing concerns about the company's ability to meet its financial targets.
The 2026 guidance projects a mid-single-digit percentage increase in net revenue and a low-single-digit adjusted operating margin. The turnaround plan involves a substantial investment of 36 billion euros in Stellantis' automotive brands, with a significant portion, 60%, allocated to the North American market. The company also plans to introduce new vehicles, refresh existing models, and integrate new technologies into its offerings.
Stellantis aims for approximately 23% revenue growth, targeting an increase from 154 billion euros last year to 190 billion euros by 2030, with a 7% adjusted operating margin by then. However, the company faces challenges in China, where domestic brands such as Xiaomi, BYD, and Geely are gaining market share, intensifying competition for European carmakers.
Challenges in the Chinese Market
European automakers, including Stellantis, are grappling with a tough market environment in China. Recently, German luxury carmaker Porsche announced plans to reduce its exposure in the region due to declining sales. Similarly, Mercedes-Benz reported a slump in third-quarter sales, attributing it to the challenging market conditions.
Earlier this month, Filosa emphasized the need for European regulators to incentivize car manufacturing within the region to counter the growing influence of Chinese competitors. He advocated for policies that "incentivize, reward, and protect" manufacturers who design and engineer cars locally.
