Shares in Continental jump despite 'challenging' market

Shares in Continental motored ahead on Thursday, after the German tyre manufacturer flagged an improving performance in the second quarter.

Updating on trading late on Wednesday, Continental warned that the global market continued to be challenging. As a result, it expected only a "very slight positive" in sales volumes worldwide in the second quarter.

But it struck a more positive tone looking forward.

It said it was already beginning to see the benefits of cost cutting, while pricing in its core automotive division had improved since the first quarter.

It also flagged weaker demand in Europe but said "significant continued" growth in China would help offset that.

"The market forecast for Europe is expected to be at the low end of our guidance," Continental said. "We expect the main growth driver for the second half of the year to be from the Chinese market."

As at 1330 BST on Thursday, the Frankfurt-listed stock was trading 8% higher.

Following the update, Jefferies, which has a ‘buy’ rating on the stock, increased its full-year 2024-2026 earnings before interest and tax forecasts by 2%.

"This upgrade is entirely in automotive, with the first half to deliver close to breakeven margins, implying a much better second quarter," it noted.

"This should provide much relief to the market in what’s a difficult operating environment for LPV production."

Continental is due to publish second-quarter results on 7 August.