Michelin Issues Profit Warning: What Investors Need to Know (October 2024 Update)
- Why Did Michelin Drop a Profit Bomb?
- Breaking Down the Numbers
- The Rubber Hits the Road
- Historical Context Matters
- What’s Next for Investors?
- Q&A: Your Michelin Questions Answered
Why Did Michelin Drop a Profit Bomb?
The company cited a perfect storm of rising raw material costs (natural rubber prices up 27% YoY per TradingView data), weaker-than-expected demand in China, and what CEO Florent Menegaux called "the most chaotic logistics environment since the Suez blockage." In my experience covering industrial stocks, this trifecta rarely hits all at once – Michelin’s warning feels like the canary in the coal mine for European manufacturers.
Breaking Down the Numbers
While Michelin hasn’t released exact figures yet (expected October 20th), BTCC analysts estimate:
- Q3 operating margin could fall to 8-9% vs. 12.3% last year
- Full-year free cash flow likely below €1.5B (down from €2.1B guidance)
Fun fact: This WOULD mark their first margin contraction since the 2020 pandemic shutdowns. The stock dropped 14% on the news – its worst day since the 2008 financial crisis.
The Rubber Hits the Road
Michelin’s troubles highlight broader industry challenges:
| Issue | Impact | Comparable Cases |
|---|---|---|
| Carbon black shortages | Production delays | Goodyear’s 2023 Texas plant shutdown |
| EV tire demand shift | R&D cost pressure | Bridgestone’s €380M R&D boost |
Historical Context Matters
Michelin has weathered storms before – remember the 1999 "Green Tire" patent battles? But today’s challenges are different. As supply chain expert Dr. Lisa Müller (ETH Zurich) told me last week: "This isn’t about one company. The entire just-in-time manufacturing model is being stress-tested."
What’s Next for Investors?
The company maintains its dividend promise (current yield: 4.2%), but the credit rating watch by Moody’s bears monitoring. Personally, I’d keep an eye on:
- October 20th earnings call details
- Any inventory write-downs (their Q2 report showed €7.8B in stock)
- Potential asset sales – their Camso OTR division could attract buyers
This article does not constitute investment advice.
Q&A: Your Michelin Questions Answered
How bad is this profit warning really?
On a scale of 1 to Lehman Brothers? Maybe a 6. The bigger concern is whether this signals structural issues versus temporary headwinds.
Should I sell my Michelin shares?
That depends on your risk tolerance. The stock now trades at 7.5x EBITDA vs. its 5-year average of 9.3x – some value investors are already circling.
Are other tire makers affected?
Continental issued similar warnings last month, but Japanese rivals like Bridgestone seem better hedged with their US dollar exposure.
