Stellantis’s stock rallied after its third-quarter results showcased significant progress in its 60 billion euro turnaround strategy, despite an industrial free cash flow drain. The automaker reaffirmed its 2026 guidance, including a target for positive industrial free cash flow next year, boosting investor confidence amid industry-wide cost pressures and challenging market conditions in China. CEO Antonio Filosa highlighted the company is ahead of schedule on cost-cutting efforts, expecting to exceed 6 billion euros by 2028.
Shares of Stellantis experienced a significant uplift on Wednesday as the European automotive giant's latest third-quarter results demonstrated tangible progress in its ambitious 60 billion euro turnaround strategy. The positive momentum signals growing investor confidence in the company's ability to restore profitability and manage rising costs.
Despite reporting a negative industrial free cash flow of 4 billion euros in the third quarter, this figure marked an improvement from the 4.3 billion euros drain observed a year prior. Revenues saw a modest 1% increase year-over-year, reaching 37.6 billion euros. Crucially, adjusted operating income surged by an impressive 184%, climbing to 256 million euros from 90 million euros in the same period last year.
A key driver for the stock's rise was Stellantis's steadfast reaffirmation of its 2026 guidance, which notably includes a target to achieve positive free cash flow next year. This commitment is a critical focal point for investors, especially as other automotive OEMs and suppliers grapple with elevated expenses.
RBC Capital Markets analyst Tom Narayan noted, "Q3 was soft, but consensus expectations were far lower. Key here is that '26 Guidance was maintained while other auto OEMs and suppliers are cutting on elevated costs."
The market responded enthusiastically, with Stellantis stock climbing approximately 9% in Milan and an additional 12% in early trading in New York. However, the stock still remains down for the year.
Below is a chart illustrating Stellantis's stock performance since the beginning of the year:
Stellantis CEO Antonio Filosa addressed investors, confidently stating that the company is ahead of schedule on its turnaround plan, initially unveiled in May. He projected that Stellantis would surpass its previously announced cost-cutting target of 6 billion euros by 2028, with 2.4 billion euros expected to be realized by early 2027.
"We are very confident in reaffirming our '26 guidance. Those include '27 free cash flow positive," Filosa reiterated, assuaging concerns regarding the automaker's ability to hit its free cash flow objectives. The 2026 guidance forecasts a mid-single-digit percentage increase in net revenue and a low-single-digit adjusted operating margin.
The comprehensive turnaround strategy involves a substantial 36 billion euro investment across Stellantis's brand portfolio, with 60% earmarked for its struggling North American division. The plan also emphasizes introducing new vehicles, refreshing existing models, and integrating advanced technologies. By 2030, Stellantis aims for roughly 23% revenue growth, targeting 190 billion euros from last year's 154 billion euros, alongside a 7% adjusted operating margin.
China Competition Heats Up
However, the road ahead is not without challenges, particularly in the fiercely competitive Chinese market. European carmakers, including Stellantis, are facing mounting pressure from formidable domestic brands such as Xiaomi, BYD, and Geely, which are rapidly gaining market share.
Recently, luxury carmaker Porsche announced plans to scale back its exposure to China amidst declining sales in the region. Similarly, Mercedes-Benz reported a slump in its third-quarter car sales in China, attributing it to a "challenging market environment."
Watch Stellantis CEO Antonio Filosa discuss the need for a level playing field for carmakers:
Earlier this month, CEO Filosa emphasized to CNBC the critical need for European regulators to implement policies that incentivize and protect car manufacturers operating within the region, thereby strengthening their position against aggressive Chinese rivals. He advocated for regulations that "incentivizes, rewards, and protects the ones that are able to demonstrate that they design cars, engineer cars."
