Before deciding to buy or sell Michelin stock, it is important to understand the key factors that must be considered in order to make an informed decision. The company's financial performance, market competition, automotive market trends, as well as external economic and political factors can influence the price of Michelin shares. This page examines these factors in detail to provide a comprehensive analysis for any investor seeking to make an informed decision about buying or selling Michelin shares.
First of all, it will of course be necessary to follow closely the car manufacturing market and its evolution, with in particular the number of new registrations each year in the sectors in which the group is present.
It will also be necessary to keep an eye on Michelin's innovations in terms of tyres. The group regularly invests in research and development in order to boost its developments and offer more attractive products than those of the competition.
It will also be necessary to follow the competition in this sector of activity, which is relatively strong, with in particular the evolution of the market shares of each of the major players, their innovations and their significant news.
Strategic partnerships and other operations aimed at increasing the group's sales or promoting its development will also have a non-negligible influence on the company's growth and therefore indirectly on its share price.
Finally, the company's financial results, which are published annually and quarterly, should also be followed with great interest. It is important to compare these results with analysts' expectations and with the objectives that the group has set in its strategic development plans.
The French company Michelin is currently one of the largest manufacturers and sellers of tyres in the world with the brands Michelin, but also BFGoodrich, Kleber, Uniroyal and Taurus.
Its business consists mainly of the sale and distribution of tyres through two approved distribution networks, Euromaster and TCI. A smaller part of its business involves the sale of tires for agricultural and civil engineering vehicles, as well as for two-wheelers and aircraft, and the sale of digital mobility equipment and services (ViaMichelin).
With no less than 68 production sites around the world, Michelin has been able to spread its turnover over the entire globe. The company's main market is France, but it also serves the European market as a whole and the American market.
Nowadays, the Michelin group is specialized in tires all over the world but its activity can be divided into different poles according to the turnover realized and thus of the importance of each sector of production. Here are the details of these poles:
Michelin also distributes its tyres through the Euromaster network throughout Europe, but also in Asia with Tire and in the United States with TCI.
The group produces the largest tires in the world with the creation of a giant tire to equip the Caterpillar Dumper in 1970 and then, in 2002, the equipment of the Caterpillar giant dumpers for mining excavation in Australia. These tyres measure more than 4 metres in diameter and the company is also behind the creation of the world's largest agricultural tyres with a diameter of 2.32 metres.
Michelin is also present throughout the world through its subsidiary BFGoodrich, particularly in the aftermarket and the original equipment market for SUVs and 4x4s. The tyres produced by this subsidiary are classified as second line products, i.e. just below the products of the six major brands in terms of price on this market. Currently, the BFGoodrich subsidiary is the number three tire manufacturer in the United States and ranks fourth in the European 4x4 tire market. Indeed, this type of tire is the brand's specialty.
With annual production exceeding 166 million tires in 2015 and the publication of 16.5 million maps and guides, Michelin generates nearly 40% of its sales in Europe and over 36% in North America. The rest is generated in the rest of the world. The group currently has 68 production sites in 17 different countries.
In the past, and in particular during the 19th century, Michelin exploited the mastery of rubber by vulcanization to file a patent for a tire with an incorporated inner tube in 1930.
During the 1930s, Michelin also made a name for itself in the railway sector with the production of railcars on tyres under the name "Micheline". This term is nowadays the most common one to designate French railcars.
It is still possible to see Michelin signs made of enamelled lava on a reinforced concrete support, produced between 1910 and 1971, along the roadsides of France.
Photo credits: ©ricochet64/123RF.COM
If it is of course important to know the activities of the Michelin group and its main sources of income, it is also necessary to take into account, at the time of your analyses, the competition of this sector of activity and thus the principal adversaries of this company which we propose to you to discover as of now.
First of all, the Bridgestone Corporation group is probably Michelin's biggest competitor. It is a Japanese tire manufacturer that was founded in 1931 and whose name comes from the translation and transposition into English of the original company name, ishibashi, which means "stone bridge". The Bridgestone Group is currently the world's leading tire company in terms of sales.
Another major competitor of Michelin is the American group Goodyear Tire and Rubber Company. This company was founded in 1898 and is currently one of the world's leading tire manufacturers behind Bridgestone and Michelin. It produces tyres for cars, aircraft and trucks. Goodyear is also responsible for the production of belts, hoses and other rubber products and chemicals related to the rubber industry. The name of the company was chosen in honor of Charles Goodyear who invented vulcanization in 1842. The Goodyear group and its tires became popular mainly because of their low maintenance costs and the fact that they were easily removable. The brand also became famous for a flexible blimp that Goodyear planned to use in the aerospace and aviation industry after World War II.
We will also follow with interest the Continental AG group which was founded in 1871 and is a large German automotive supplier based in Hanover. The group is mainly known for its tyres but also produces automotive parts and is active in rubber recycling. Continental AG currently employs more than 244,000 people in more than 60 different countries around the world. Its organization is divided into several large divisions with Continental Pneumatics, ContiTech, and Automotive Group.
Pirelli & C SpA is also a big name in this sector and is an Italian group specialising in the production of tyres and is a subsidiary of ChemChina. Today, the group is the fifth largest producer in the world through its subsidiary Pirelli Tyre of which it is the sole shareholder. The group's sales include mainly car, truck and motorcycle tyres, with the bulk of sales to end consumers. The group also operates in various countries, mainly in South America and Europe, followed by North America, the Middle East, Asia Pacific and Russia.
Finally, the Hankook Tire Group is also a major global tire manufacturer based in South Korea. The company was founded in 1941 as Hankook Tire Manufacturing and also produces other automotive equipment such as batteries, wheels and brake pads. It is the seventh largest tire manufacturer in the world.
The Michelin group has also set up numerous partnerships with various large companies. We propose you to discover here the main partner companies of this company.
In 2008, Michelin signed a contract with several partners including the Accenture Group, Atos Origin and Logica. These partnerships aim to allow Michelin to have a better operational efficiency and a better reactivity and flexibility of its information systems.
The Europcar group has also signed a long-term partnership with the Michelin group to equip its entire fleet.
Finally, Michelin is a partner of the CNRS in scientific research related to its field of interest. This association has clearly contributed to the brand image of the tire manufacturer in France and around the world.
In 2018, the group also partnered with this company in a technical connection between its reservation system and Michelin restaurants' mobile apps and website.
Even more recently, Michelin and Faurécia have created a joint venture to produce hydrogen fuel cells, bringing together the various activities of the two entities in this field.
The Michelin share has a number of advantages for traders who decide to speculate on its price. Firstly, it can be pointed out that the Michelin Group is currently the number one tire company in the world. It holds approximately 15% of the market share, which is about the same as its direct competitors Bridgestone and Goodyear. This advantage is further strengthened by the group's rapid market share gains in emerging countries, which should consolidate its leading position in the long term.
The structure of the Michelin Group and its organization into three distinct divisions - passenger car and light truck tires, which account for 57% of sales, truck tires, which account for 29% of sales, and specialties, which account for 14% of sales - is also one of the strengths of the Michelin company. The group also enjoys an excellent geographic spread of its activities with a very balanced sales mix between the Americas, Europe and the rest of the world.
While Michelin's competitors may be exposed to the economic health of automakers, Michelin can count on its replacement tire business, which accounts for more than ¾ of its activities, to be protected from the vagaries of this market.
Michelin is also very attractive to investors thanks to a proven pricing policy based on lowering exposure to natural rubber prices, carbon blacks and other petroleum-derived raw materials, which account for 40% of purchases. To do this, it is constantly reducing its dependence on suppliers by producing the materials it needs itself, increasingly in an environmentally responsible manner.
The group can also count on high margins on its specific products, such as specialty tires for aeronautics, agriculture, civil engineering, mining or racing two-wheelers. Its range of premium tires has a margin level that is twice as high as that of conventional tires.
In addition, Michelin can rely on its strong investments in innovation and research, in particular in improving its production levels through the increasing automation of its industrial sites in Europe as well as on a significant deployment of its production in emerging countries.
Another of Michelin's strengths is its recent innovations in green tires, which offer low rolling resistance and are expected to eventually account for more than 40% of the passenger tire market, compared to only 10% today.
Finally, the Michelin Group is one of the most financially solid companies compared to its competitors and its rating is particularly high in this respect. We also note that the group knows how to be generous with its shareholders, notably by buying back shares and committing to a pay-out of at least 35%.
Of course, Michelin stock does not only have advantages for investors and it is also important to consider these weaknesses before buying or selling Michelin shares.
In particular, it should be noted that the tire market has been experiencing a worrying phase of stagnation for several years. This feeling is thus reinforced by the low visibility of the activity dedicated to heavy goods vehicles, in particular due to a drop in demand in North and South America and an increasingly competitive offer from the Asian market, which in 2016 led to the closure of three production plants in Europe.
Although Michelin protects itself from fluctuations in the price of raw materials such as rubber, the fall in the price of rubber benefits the group's competitors, especially low-cost competitors.
Finally, Michelin shares remain relatively expensive to buy despite the lock-up, compared to the long-term outlook.
The Michelin Group owns several subsidiaries and joint ventures that are important to include in your analysis of this stock. For example, we know that Michelin is a shareholder in Symbio FCell which is a manufacturer of energy production systems. The group also bought 40% of Allopneus in 2015, which specializes in tire sales. Finally, Michelin created a joint venture with Barito Pacific Group in 2015 in the field of eco-responsible rubber.
Michelin Group's capital is distributed as follows: 3.10% by The Vanguard Group, 2.52% by Norges Bank Investment Management, 2% by Michelin, 1.91% by Oddo BHF Asset Management, 1.45% by BlackRock Fund Advisors, 1.26% by Amundi Asset Management, 1.05% by Wellington Management, 1.03% by Invesco Asset Management, 0.78% by Natixis Investment Managers International and 0.66% by Dimensional Fund Advisor
The Michelin Group is registered in France as an interest representative with the Haute Autorité pour la transparence de la vie publique. Since 2008, the Group has also been listed in the European Commission's transparency register for interest representatives. It declared three full-time employees for 2015. Lastly, the Michelin Group also declared having carried out lobbying activities in the United States in 2017, for a total amount of €853,000.
Michelin's share price can fall for a number of reasons, including if Michelin's financial results, such as sales, earnings or growth, do not meet investors' expectations or financial analysts' forecasts, the share price may fall. If competition in the tyre industry becomes more intense, this may have a negative impact on the Michelin share price. The costs of raw materials, such as natural rubber, can fluctuate significantly, which can affect the company's profit margins and therefore its share price. Economic and political conditions can have a significant impact on share prices, for example in the event of a recession or geopolitical instability. Finally, any production problems, such as product recalls or supply chain disruptions, can lead to a decline in the share price.
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