Stellantis shares leap on bullish cost cuts, cash flow comments

By Giulio Piovaccari and Gilles Guillaume

MILAN, Oct 28 (Reuters) - Stellantis said on Wednesday it was confident of exceeding its cost-saving targets, underpinning its profit outlook and expectations of a return to positive cash flow in 2027, after reporting higher third-quarter operating income.

The comments helped send shares in the Fiat-to-Jeep maker up nearly 15% as investors found fresh signs that CEO Antonio Filosa's turnaround strategy is gaining traction after more than two years of falling sales and profitability.

"We will exceed the €6 billion run rate cost saving by 2028," finance chief Joao Laranjo told analysts.

Earlier this year, Filosa launched a group-wide efficiency drive, known as the "Value Creation Program", targeting €6 billion ($6.7 billion) of cost savings by 2028.

"In quarter four, the good job that we started in quarter two and continued in quarter three will multiply the savings," Laranjo said. "So there will be hundreds of millions of euros that will be generated as additional cost savings in quarter four."

2027 POSITIVE CASH FLOW A 'MUST HAVE'

Filosa said Stellantis firmly believed it could exceed an initial target of €2.4 billion in cost savings in 2027, after saying earlier on Wednesday that the group was on track to implement at least 40% of the planned efficiencies by the end of this year.

Cost savings, along with new model launches, price stabilisation and quality improvements, will support Stellantis through 2027, the CEO said, allowing it to reaffirm its full-year forecasts and a closely watched target to return to positive cash flow in 2027.

"It's not a wish, it's not nice to have, it's a must have. We are on track for that. We will deliver that in 2027," Filosa said.

Stellantis shares in Milan were up 14.3% at 1430 GMT.

SHARES REBOUND FROM LOWS

Earlier this month, the shares fell to their lowest level since the group's formation in 2021, leaving the stock down more than 60% since the start of the year.

Fabio Caldato, a fund manager at AcomeA Sgr, which owns Stellantis shares, said many investors had been burned by the steep decline.

"Before they really buy back into the stock, investors want concrete evidence that the turnaround is actually underway, and a return to positive cash flows in 2027 is key," he said.

That said, "as the market is so underexposed to Stellantis, once evidence of a recovery emerges, the rush to buy back into the stock can be very strong".

Short interest in Stellantis stood at 11.5% of its free float, worth about €1.05 billion, as of Tuesday's close, according to data analytics firm Ortex.

In the third quarter, Stellantis recorded an industrial cash outflow of €4 billion, but adjusted earnings before interest and taxes rose to €256 million from €90 million a year earlier, beating a Reuters poll consensus of €191 million.

Quarterly revenue was broadly unchanged at €37.6 billion, with slight increases in Europe and South America and a 3% decline in North America, historically Stellantis' most profitable market.

($1 = 0.8993 euros)

(Reporting by Giulio Piovaccari in Milan, Gilles Guillaume in Paris, Kalea Hall in Detroit. Additional reporting by Medha Singh in Bengaluru. Writing by Giulio Piovaccri. Editing by Emelia Sithole-Matarise and Mark Potter)