Volkswagen AG: Post Q2: Weak earnings, strong cash flow, still deep value

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Volkswagen AG: Post Q2: Weak earnings, strong cash flow, still deep value

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Volkswagen AG

Post Q2: Weak earnings, strong cash flow,

still deep value

Reiterate Rating: BUY | PO: 92.00 EUR | Price: 71.46 EUR

Mixed Q2, with weaker earnings but better cash flow 27 July 2026

The group op. margin of 4.2% missed both consensus and BofAe at 4.7%. The larger Equity

miss came below the operating line: the financial result fell to €-930m, partly reflecting

impairments on investments, driving EPS down to €2.56 versus consensus at €4.70 and

Key ChangesBorfee at €4.39. By contrast, Automotive net cash flow of €1.2bn beat consensus at

€0.5bn, supported by lower capex and better working-capital management. Segment (EUR) Previous Current

performance was mixed, but Core, Progressive and Sport Luxury all fell short of our Price Obj. 90.00 92.00

expectations; we provide a detailed overview in Exhibit 1. The main negative was Others 2026E EPS 14.67 12.08

& Reconciliation, which continues to weigh heavily on group earnings (c-1% of group 2027E EPS 16.50 16.59

revenues in Q2) due to rising China losses and Scout ramp-up costs. 2028E EPS 19.52 19.11

Analyst call highlights: FY26 guidance, Restructuring, etc 2026E2027E EBITDAEBITDA (m)(m) 52,154.453,766.6 51,102.154,055.4

Management defended unchanged FY26 operating margin guidance of 4.0–5.5%, but 2028E EBITDA (m) 57,242.6 57,168.5

delivery now depends on a materially stronger H2 and, given normal Q3 seasonality, a 2026E DPS 4.59 4.75

particularly strong Q4. The expected improvement rests on Audi’s product launches and

mix, further cost savings, ongoing workforce reductions, no repeat of c.€1bn of H1 Horst Schneider >>

restructuring and ID.4-related charges, and potential relief from CO₂ provisions. Research Analyst