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On Wednesday, Schaeffler AG (ETR:SHA_p) (SHA:GR) (OTC: SFFLY) shares faced a rating downgrade by Citi analysts from ’Buy’ to ’Neutral’, accompanied by a significant price target reduction from EUR 8.10 to EUR 4.50. The revised evaluation by Citi comes after Schaeffler experienced a challenging fourth quarter in 2024 due to postponed sourcing decisions by its customers.
The automotive and industrial supplier, Schaeffler, now trades at approximately 6 times its forecasted FY26 earnings per share (EPS), which Citi notes could be an affordable entry point for investors betting on a rebound in European industrial production. Nevertheless, the analysts at Citi express concerns over the company’s free cash flow (FCF) generation capabilities in the years 2025 and 2026, given the management’s current focus on completing the Vitesco transaction.
Citi’s assessment points to uncertainties regarding Schaeffler’s ability to return to previous margin levels in the near term. The firm’s financial performance and strategic decisions appear to have dampened the analysts’ confidence in a swift recovery of Schaeffler’s profitability metrics.
The downgrade and the new price target reflect a more cautious outlook on Schaeffler’s financial prospects, as the company navigates through its ongoing corporate activities and the broader market challenges. This adjustment in Citi’s stance is likely to influence investor sentiment as they reassess the potential risks and rewards associated with holding Schaeffler stock.
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