UPDATE 1-Continental AG raises 2014 outlook on strong first quarter

Fri Apr 25, 2014 4:13am EDT

* Raises EBIT margin target to 10.5 percent vs 10 percent

* Q1 adjusted EBIT up nearly 20 percent

* Q1 sales rise 4.4 percent (Adds details on earnings, background)

FRANKFURT, April 25 (Reuters) - German automotive supplier Continental on Friday raised the outlook for its 2014 adjusted operating margin, saying it expected a strong start to the year to continue.

After a six-year sales slump to a two-decade low, Continental's core European auto market is finally showing signs of a steady recovery.

"We are confident that we can maintain the current momentum, as the positive trend of the first three months appears to be continuing in the second quarter," Chief Executive Elmar Degenhart said in a statement ahead of the company's annual shareholders meeting.

Continental raised its target for earnings before interest and tax (EBIT) this year to 10.5 percent from 10 percent.

Adjusted EBIT for the first quarter was up nearly 20 percent to 953 million euros ($1.3 billion), the company said. Sales increased 4.4 percent to 8.4 billion euros.

Like many other European exporters, Continental was hit by the strong euro. Striping out currency and other effects, sales rose by 8.3 percent.

French rival Michelin also gave quite an upbeat full-year outlook in February, predicting a 3 percent rise in sales after reporting a sharp drop in sales and profit in 2013.

Continental's shares fell 0.6 percent in early Frankfurt trading, broadly in line with the German blue-chip index which lost 0.8 percent.

"The figures came in slightly below consensus," DZ Bank analyst Michael Punzet wrote in a note to clients. He maintains his "buy" rating on the stock.

Continental will release its quarterly report on May 6.

($1 = 0.7236 Euros) (Reporting by Kirsti Knolle; Editing by Erica Billingham)