Forvia Shares Fall After UBS Downgrade

Shares of Forvia (EPA:FRVIA) fell over 4% on Tuesday following a downgrade by UBS analysts, who revised their rating on the automotive supplier to "neutral" from "buy."

The note, dated Tuesday, cited numerous challenges facing the company, including heightened uncertainty in the sector, operational risks, and a weaker financial position.

UBS flagged several specific issues contributing to their cautious stance. Key among these is a projected volatility in Original Equipment Manufacturer production schedules, which could undercut Forvia's cost-saving measures planned for 2025.

Additionally, regulatory pressures, such as stricter CO2 emissions targets in Europe, and potential disruptions from a Volkswagen (ETR:VOWG_p) strike and global trade tariffs, were flagged as potential headwinds.

The company also faces balance sheet constraints, which UBS analysts believe leave little room to navigate unforeseen challenges.

Forvia's financial leverage remains high, compounded by a recent credit rating downgrade that may prevent the company from reducing borrowing costs in the near term.

While the firm is expecting cash inflows of €750 million from an ongoing asset disposal program, delays in realizing these proceeds add to investor concerns.

The revised price target set by UBS stands at €9, a reduction from the previous target of €13. This downgrade reflects lower-than-expected earnings and a tempered outlook on Forvia's sales and margins through 2025 and beyond.

Forvia’s earnings per share for 2024 are now projected at €0.10, down 71% from previous estimates, with similarly significant reductions for 2025 and 2026 forecasts.