Jefferies Initiates Volkswagen At Underperform, Expects Muted Impact From Restructuring

Volkswagen AG (ADR) VLKAY would likely record flat pre-restructuring operating earnings in 2017-2018, with restructuring efforts being offset by markets and forex, Jefferies’ Philippe Houchois said in a report. He initiated coverage of the company with an Underperform rating and a price target of €100.

Ability To Deal With Managing Costs Organically

Volkswagen has exhibited its ability to manage the cash cost of its emission crisis organically, analyst Philippe Houchois mentioned. He added that the focus should turn to:

• The returns that can be expected, since the company seems “intent on remaining at the high end of the industry’s ‘capital spenders’”
• The prospects for improved governance

Strong Shareholder Missing

There is “no sign of voting shareholders involvement to effect change,” Houchois wrote. He added that with outside pressure on the company being intense, there is a need for a large shareholder with voting rights, liken Porsche SE, to make a decision or agree to act.

While Volkswagen’s earnings would improve, the shares already reflect this, the analyst commented.

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