Morningstar | Faurecia Reports 3Q 2018 Revenue, Confirms 2018 Guidance; Maintaining EUR 37 Fair Value Estimate
No-moat rated French auto parts supplier Faurecia is required to disclose full financial statements every six months. The company reports only revenue in the first and third quarter of each year. For the third quarter 2018, Faurecia reported EUR 4.0 billion in revenue, representing a 5.9% increase compared with the prior year. Excluding the unfavorable impact of currency translation and bolt-on acquisitions, organic revenue growth would have been 4.7%. The company had adopted IFRS 15 accounting in the first quarter this year and restated the third-quarter year-ago results. The accounting standard excludes from revenue, pass-through sales of exhaust catalytic converters to Faurecia's emission control customers, which is highly sensitive to changes in the price of platinum and palladium.Faurecia's third-quarter revenue growth was strong, excluding currency impact, up 8.3%, and confirmed full-year guidance for 8% revenue growth, “at constant currency.†With our full-year estimated 6.6% increase in revenue (including a negative 4.9% estimated currency impact from the USD/EUR), we are roughly in line with management’s forecast and see no reason for a fair value estimate change. Shares of 2-star, no-moat rated Faurecia are currently trading at a 25% premium over our EUR 37 fair value estimate. In our opinion, the stock is overpriced relative to our forecasts for cash flow and returns.
Faurecia is an automobile equipment supplier based in France. Co.'s activities can be divided into four business units: Automotive Seating (design of vehicle seats, manufacture of seating frames and adjustment mechanisms, and assembly of complete seating units); Emissions Control Technologies (design and manufacture of exhaust systems); Interior Systems (design and manufacture of instrument panels, door panels and modules, and acoustic components); and Automotive Exteriors (design and manufacture of front ends and safety modules). Some of Co.'s customers are PSA Peugeot Citroen, VW Group, Renault-Nissan, Ford Group, BMW and GM Group.
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