Cash haul drives Renault, Stellantis shares higher

Auto Stocks: Shares in Renault hit seven-month highs and rival Stellantis shot to record peaks on February 15 after the carmakers pledged to reward investors with a big jump in annual dividend and a share buyback worth billions of euros.

The bumper payouts helped soothe investors' concerns over the outlook for European carmakers as they struggle with competition from cheaper Chinese rivals, higher costs and tepid demand, while consumers tighten their budgets due to rising costs of borrowing.

For Stellantis, the return of cash was a relief after agreeing big pay increases to end a prolonged strike by workers in North America last year, which knocked profits in the second half.

At Renault, the stronger cash position and margin growth delivered in the automaker's 2023 results on Wednesday night were the latest sign that a turnaround under Renault's CEO, Luca de Meo, is bearing fruit.

Renault, Stellantis shares

Renault shares were last up more than 7 per cent at 10:41 GMT, set for their best day in more than a year and having touched their highest since July. That compares with a 0.7 per cent rise in the French stock market index, CAC 40.

Renault also said it would propose a dividend of 1.85 euros for 2023, up from a payout of 0.25 euro for 2022, and much better than the 1.4 euros expected by analysts.

Meanwhile, Stellantis rose 4.1 per cent to a record high despite its warning of a turbulent 2024.

The world's third largest automaker by revenues, whose brands include Fiat, Jeep and Citroen, said it will launch a share buyback programme worth 3 billion euros this year.

The company's stock has risen 77 per cent since January last year.

"Dividends and buybacks announcements are supporting shares versus a cautious outlook. A cautious outlook is understandable for both companies, as the current macro environment is not easy to navigate," said Massimo Baggiani, Founder of Niche Asset Management, which owns Renault shares.

"Renault posted an excellent cash flow for 2023 and has a solid outlook for 2024," he added.

"Stellantis remains a "growth" stock, thanks to earnings improvement, a management of exceptional standing and synergies, although margins are already very good."