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On Friday, Citi analysts, led by Ross MacDonald, reaffirmed their Buy rating on Pirelli & Co (PIRC:IM) (OTC:PLLIF) with a steady price target of EUR7.00. The endorsement came as the analysts updated their model for the tire manufacturer to incorporate market data from January and February. The adjustments were made in anticipation of any potential impacts from tariffs that could affect the company’s financial outcomes.
The first quarter of 2025 is projected to show robust results for Pirelli, with a positive price/mix increase of 2.7% year-over-year and a volume uptick of 0.9%, culminating in an estimated 3.6% organic revenue growth. The company’s revenues for the quarter are expected to reach EUR1.73 billion, coupled with an EBIT margin of 15.6%, which is a slight increase of 10 basis points from the previous year and 3% higher than the consensus.
Citi analysts anticipate that Pirelli’s management will provide an update on tariffs, which could lead to a revision of EBIT by approximately 5% in a worst-case scenario. The potential tariffs under consideration could involve a 25% duty on imports from Brazil and Europe, although the content from the USMCA agreement with Mexico is currently not subject to these tariffs.
The upcoming board meeting for Pirelli, scheduled for April 28th, is expected to shed light on the company’s shareholder structure, a topic of significant interest for investors. Citi’s analysis points out that within the Stoxx 600 index, there are only two other companies with similar balance sheet and margin profiles that are trading below 10 times price-to-earnings (P/E) ratio.
In light of these findings and with Pirelli’s shares currently trading 15% below their highs, Citi has added the tire manufacturer to the Citi European Focus List, signaling continued confidence in the stock’s performance.
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