Stellantis: Guiding Market Expectations for Significantly Lower Profitability

Key Morningstar Metrics for Stellantis

• Fair Value Estimate: $14
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High

What We Thought of Stellantis’ Earnings

Stellantis STLA released preliminary results for the first half of 2025, citing a misalignment between consensus expectations and actual profitability levels. Shipments and revenue declined 6% and 13%, respectively, with an adjusted operating income of EUR 0.5 billion, a 94% year-over-year decline.

Why it matters: The outlook for full-year profitability is far lower than consensus expectations as well as our own. With a 0.7% adjusted operating income margin realized in the half year, Stellantis will need to generate a margin greater than 6% for the second half to reach consensus and our expectations for the full year, which we don’t believe is achievable.

• Severe deleveraging as a result of a continued decline in volumes plays a large part in the lower profitability, in addition to higher warranty costs, a negative geographic (lower US volumes) and product mix (lower light commercial vehicle and higher battery electric vehicle sales in Europe) effect, and EUR 300 million related to US tariffs.
• While volumes should improve in the second half relative to the first, we don’t expect sufficient volume recovery to offset the declines of the first half, thus deleveraging will remain a key headwind. Tariff-related costs of approximately EUR 900 million are expected in the second half. The negative product mix effect is likely to remain unchanged.

The bottom line: Lowering our 2025 forecast has a marginal impact on our fair value estimate for no-moat Stellantis, which assumes an average adjusted operating income margin of approximately 5%, excluding restructuring costs, over our forecast period.

• The huge unusual expense of EUR 3.3 billion shows progress, although a very small hint, of focusing on the core. About half the expense is related to the termination of its hydrogen fuel cell project and two Maserati platforms. We believe this is positive for a company that has completely drifted from the core value propositions that customers sought in its core, high-volume segments.