BMW Profit Margins Poised For New Highs.
“we are convinced that BMW will manage to sustain the high level of 10 to 11 per cent group EBIT margins”
Investors managed to look past BMW’s news that its autos profit margin fell back to 8.2 per cent in 2014’s final quarter because apart from that, everything in the garden looks rosy.
For all of 2014, BMW’s earnings before interest and taxes (EBIT) soared 14 per cent to €9.12 billion compared with the previous year, thanks in part to sales of the X5 SUV and new front-wheel drive 2-Series Active Tourer. BMW is targeting a fifth consecutive record year in vehicle sales, and is battling Audi and Mercedes-Benz for the premium-auto sales top spot by the end of the decade.
Evercore ISI is as long-term supporter of investing in BMW and said the company is materially more profitable now than any time in its history. The fourth quarter for BMW is not normally a reliable signpost to the year ahead, it said.
“Over previous decades, BMW was a business generating 6-7 per cent EBIT margins. For coming years, (excluding extraordinary foreign exchange gains) we are convinced that BMW will manage to sustain the high level of 10 to 11 per cent group EBIT margins, deliver revenue growth and generate significant cash that allows the company to efficiently innovate and pay higher cash returns to shareholders,” Evercore ISI analyst Arndt Ellinghorst said.
Morgan Stanley was also disappointed with the 8.2 per cent fourth quarter margin, but said BMW remains its top long-term pick for investors. China though, should not be taken for granted, because growth rates there were slowing.
The future looked good though.
Best managed
“BMW remains one of the best managed firms in the sector, in our view, with an exceptionally strong brand, product and technology lineup. Business looks “future proof”. As a first mover on the green-tech front, BMW is well on track to meet future CO2 targets. Industrialisation of lightweight carbon-fibre construction should protect BMW from undergoing the same negative mix to small cars as peers,” Morgan Stanley said in a report.
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