FRANKFURT -- First-quarter operating profit at Continental AG missed expectations on Wednesday, sending the stock down 4 percent even though the auto supplier repeated it expected another record result this year.
Investors were concerned that near stagnant year-to-year sales and a higher-than-expected earnings contribution from its newly-acquired Phoenix unit meant the rest of Continental was starting to suffer from a weak automotive industry.
"Our goal continues to be the achievement of new top sales and earnings figures in 2005 for the fourth time in a row, and we are well on our way there," Chief Executive Manfred Wennemer said in a statement.
Earnings before interest and taxes increased 9.5 percent to 281.7 million euros ($362.4 million), just shy of the 285 million average estimate of 22 analysts polled by Reuters.
While operating profit rose roughly 7 percent at both its key Automotive Systems and Passenger Tire divisions, the major gain came from ContiTech, where earnings jumped 19.5 percent thanks entirely to the Phoenix consolidation. Phoenix contributed 11.3 million euros to earnings before interest and taxes.
"If you exclude Phoenix, Continental couldn't maintain the earnings momentum from the previous quarters," said Aleksej Wunrau of Landesbank Baden-Wuerttemberg. But he reiterated his "buy" rating, citing the firm's ability to grow in a stagnant industry.
NO ROOM FOR ERROR
First-quarter group sales rose 8.9 percent to 3.25 billion euros. When adjusted for currency effects and the 237.7 million euro contribution in turnover from Phoenix, the gain was only 2.6 percent, the company said.
Net income rose by almost a quarter to 167 million euros.
Commerzbank analyst Adam Collins said the stock's continued outperformance meant the margin for error was very small among investors, and the company did not appear to be delivering the organic growth in Automotive Systems that some had expected.
"We like the stock, we have it on a buy, but we recognize you have to have a pretty perfect scorecard to please the markets in the current situation," he said.