Alstom sinks as J.P. Morgan and CIti downgrade after sharp guidance cut

What happened

Alstom shares sank after J.P. Morgan and Citi downgraded the stock, following Alstom's cut to profit guidance and car production targets due to technical and production issues, including with Coradia Max high-capacity regional trains.

Confirmed

Global impact / market context

Alstom now expects a profit margin on adjusted EBIT of about 1%, down from about 6.5%, and free cash flow of negative €1.5 billion, which means cash going out rather than coming in. This hits earnings and the ability to fund operations.

Confirmed

The downgrades and lower price targets show analysts expect Alstom's execution problems to last. J.P. Morgan sees free cash flow recovery delayed by at least 12 months. This may keep investors cautious on the shares until production issues are resolved and cash generation improves.

Analyst inference

What to watch

1. Alstom reported a hit of about €1 billion to adjusted EBIT in the first half, mainly on Coradia Max projects. J.P. Morgan called this a surprise given last year's second-half hit of about €190 million. Confirmed
2. Watch whether Alstom resolves the Coradia Max technical issues and meets its reduced target of about 4,000 cars produced. Further delays could push back the free cash flow recovery analysts expect. Analyst inference
3. J.P. Morgan forecasts a €106 million cash outflow in fiscal 2028 and a €918 million inflow in fiscal 2029. If actual cash flow falls short of this path, another guidance cut could follow. Analyst inference

Evidence

• seekingalpha.com