Earnings call transcript: Stellantis Q2 2025 results miss EPS forecasts

Stellantis NV reported a significant H1 2025 earnings miss with EPS of -€0.78, far below expectations, and a €3 billion industrial free cash flow outflow, leading to a negative stock reaction despite a slight revenue beat. The company attributed the 'tough' period to declining shipments and weak margins but highlighted sequential improvements and strategic actions. Management projects a H2 revenue increase and low single-digit adjusted operating income margin, driven by new product launches and a focus on multi-energy offerings, though significant challenges like tariffs and market pressures remain.

Analysis

Stellantis NV has reported a profoundly challenging first half for 2025, characterized by a severe earnings miss, with an EPS of -€0.78 against a €0.35 forecast, and a significant €3 billion industrial free cash flow outflow. The negative performance, which includes a 13% year-over-year decline in net revenue to €74 billion and a compressed adjusted operating income (AOI) margin of just 0.7%, triggered a negative market reaction despite a minor revenue beat. New CEO Antonio Fallosa attributes the weakness to past strategic errors, specifically the discontinuation of seven popular nameplates which cost an estimated 300,000 units in annual sales. The new management is now executing a strategic reversal, aiming to recapture market share by reintroducing iconic models like the Jeep Cherokee and Dodge Charger, and powertrains like the Hemi V8, alongside a broader pivot to a multi-energy platform strategy. While the company guides for a sequential improvement in H2 2025 with revenue growth and a low single-digit AOI margin, it faces a substantial headwind from tariffs, with an estimated €1.2 billion impact expected in the second half. Despite the operational and financial distress, the company maintains a strong liquidity position of €47 billion and is trading at a low Price/Book multiple of 0.33, indicating potential undervaluation if the turnaround strategy proves successful.

Key Decisions for Investors

• The investment thesis for Stellantis now rests heavily on the new management's ability to execute a strategic turnaround by reintroducing popular, discontinued models; monitor upcoming sales data for the new Jeep Cherokee and Dodge Charger for early signs of success.
• Investors should exercise caution regarding the H2 2025 outlook, as the guided 'low single-digit' AOI margin will be heavily pressured by an anticipated €1.2 billion tariff impact, potentially delaying a return to positive free cash flow.
• While the stock's low Price/Book multiple of 0.33 may attract value investors, this must be weighed against significant execution risks, weak underlying profitability, and the uncertainty pending the full strategic plan reveal at the Q1 2026 Capital Markets Day.
• Focus on key operational metrics such as the dealer order book, which grew 90% year-over-year, and inventory levels, as these will be the leading indicators of whether the new operational fixes are gaining traction ahead of financial results.