Continental AG Rises as Car Market Declines Seen Slowing

Continental AG, Europe’s second-biggest car-parts maker, rose to the highest in almost 21 years as forecasts that the region’s car and truck markets will stop declining raised investor confidence in the industry.

Continental gained as much as 3.1 percent to 107.95 euros, the highest level since at least Aug. 18, 1992, based on closing prices. The stock was trading up 2.8 percent at 2:56 p.m. in Frankfurt. Volume was 59 percent of the three-month daily average. The shares have increased 23 percent this year, valuing the company 21.5 billion euros ($27.7 million).

The European truck market, which contracted 12 percent in the first five months of 2013, seems to be bottoming out, Daimler AG truck-unit chief Wolfgang Bernhard said on July 1. Matthias Wissmann, president of the VDA carmakers association in Germany, reiterated a day later that annual auto sales in the country will linger at about 3 million vehicles in coming years after falling to as low as 2.9 million deliveries in 2013.

“We see production volumes in Europe bottoming out and still good growth in the U.S.,” Marc-Rene Tonn, a Hamburg-based analyst at M.M. Warburg & Co., said by phone. “This gives confidence that sales and earnings will improve in the second half of the year.” Declining prices for synthetic and natural rubber are likely to continue helping profit at Continental’s tire division, he said.

The manufacturer, which ranks second in Europe’s car-parts industry to closely held Robert Bosch GmbH, is targeting a sales increase of about 5 percent this year to more than 34 billion euros and predicting an operating-profit margin exceeding 10 percent of revenue. The Hanover, Germany-based company will buy back a high-yield bond as of July 15 to reduce interest costs.

“Continental benefits from the rising demand for high-tech products such as staying in highway lanes or assisted parking,” said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler. “They are dominating the scene together with Bosch and, as investors can’t buy into Bosch, they are focusing on the DAX-listed Continental shares.”

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