July 4 (Bloomberg) -- PSA Peugeot Citroen, Europe’s second-biggest carmaker, rose the most in almost seven weeks after analysts at Goldman Sachs Group Inc. said the unprofitable company is likely to beat a goal of reducing cash consumption.
Peugeot jumped as much as 8.1 percent to 6.73 euros as of and was trading up 8 percent at 10:59 a.m. in Paris, the steepest intraday increase since May 17. Volume was 89 percent of the three-month daily average. The stock has gained 23 percent this year, recovering from a 23-year low in 2012.
Reorganization measures taken by Paris-based Peugeot and its Faurecia car-parts unit may lead to negative operational free cash flow of 1.3 billion euros ($1.7 billion), narrower than the manufacturer’s forecast of cash consumption at 1.5 billion euros, Stefan Burgstaller, a London-based analyst at Goldman Sachs, said in a note to clients dated yesterday. Europe’s economy may be improving, helping revive industrywide car sales, he said.
Goldman Sachs raised its recommendation on Peugeot shares to buy from neutral and added it to the bank’s “conviction list.” Burgstaller also increased the stock-price estimate by 8.4 percent to 9 euros a share from 8.30 euros.
The maker of the Peugeot 308 hatchback and Citroen DS models is struggling to return to profit as the European car market heads into a sixth consecutive year of contraction. Peugeot Chief Executive Officer Philippe Varin, who started his second four-year term in June, is seeking to end cash burn at the company by the end of 2014, after the carmaker consumed 200 million euros a month last year. The strategy includes expanding sales outside Europe, eliminating 11,200 jobs in France by 2015 and shutting a factory near Paris.
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