French Rail Giant Alstom Crashes On “Painful” Second Warning

Alstom shares crashed in European trading after costly delays on German train orders forced the French train manufacturer and rail-equipment supplier to slash its earnings outlook (again), forecast a 1.5 billion euro cash burn, and signal plans to sell assets to shore up its balance sheet.

Alstom’s problems center on its Coradia Max regional trains, where engineering issues discovered during production required expensive retrofits. The disruption has spread to other German projects, sparking delays and penalties and pushing the Coradia project’s gross margin into negative territory.

The French trainmaker now expects an adjusted operating margin of around 1% this fiscal year, down from 6.5% previously. It replaced its forecast for positive free cash flow with projected negative free cash flow of 1.5 billion euros. Its train-car production target is down to about 4,000 units from as many as 4,500.

“Coradia Max delays have spread into other German projects, turning margins negative and pushing milestone cash into later years,” Bloomberg Intelligence analysts Omid Vaziri and Sakshi Batra wrote in a note.

They said, “The need for a new €2 billion deleveraging plan, potentially including disposals, is more concerning just two years after the prior recapitalization.”

Shares in Paris crashed 25%, their largest intraday decline since the company pulled its cash-flow guidance in mid-April. Year to date, the stock is down 52%.

JPMorgan analyst Akash Gupta called the reset a “painful but necessary clearing event.” The revised guidance implies fiscal 2027 adjusted operating profit of about 200 million euros, roughly 85% below consensus and JPM’s estimate.

Goldman Sachs analyst Daniela Costa said that earnings estimates would likely be cut “very meaningfully.”

Costa questioned why the warning was only emerging now if some problems dated to a production pause in the first quarter, and whether balance-sheet measures could include an equity issuance before September 2027 to protect the company’s credit rating.

According to Bloomberg calculations, today’s share-price crash generated paper gains of roughly 300 million euros across all outstanding short positions in the stock.