JPMorgan downgrades Pirelli to Neutral despite solid first-half results

Investing.com -- JPMorgan downgraded Pirelli to Neutral from Overweight on Thursday after the tire maker reported first-half results the bank described as solid, citing limited upside at its price target.

Analyst Jose Asumendi said Pirelli "delivered a solid set of results," with second-quarter revenue of 1,757.3 million euros and organic growth of 1.4%, excluding the effects of foreign exchange, hyperinflation and changes in the scope of consolidation. Including those effects, growth came in at 1.0%.

JPMorgan noted that price/mix contributed 2.9%, helped by an improved product mix and a positive regional mix. Adjusted EBIT rose 0.7% year over year to 280.4 million euros, while the adjusted EBIT margin held stable at 16%.

Furthermore, the firm noted that net cash flow before dividends and the consolidation of the Xushen Tyre call option was negative 556.9 million euros in the first half, compared with negative 503.7 million euros a year earlier.

Despite the steady operating performance, JPMorgan lowered its rating following the earnings call, explaining that its estimates "are not differentiated from consensus" and that the stock trades at its price target at roughly 1.3 times fiscal 2026 EV/sales.

JPMorgan continues to expect Pirelli to execute on its industrial strategy while "protecting the cash flow and balance sheet in the medium term."

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