BMW Profitability Slips In Quarter, But Investors Happy.
“This is arguably the world’s best run automaker. It’s certainly the most stable”
It might be hard to believe but BMW, with its proven record of profitability, is valued on the stock market at just over $55 billion, while much smaller, upstart Tesla, yet to make a profit, is valued at just under $60 billion.
BMW’s latest results had investors purring with satisfaction, even though earnings before interest and taxes (EBIT) slipped 6.3 per cent to €2.75 billion in the second quarter, compared with the same period last year. The automotive margin narrowed to 8.6 per cent from 10.1 per cent.
“BMW just keeps on delivering the results, quarter after quarter, year after year. There might not be much growth. But we’ve had multiple years now with profits at a high level,” Bernstein Research analyst Max Warburton said.
“This is arguably the world’s best run automaker. It’s certainly the most stable. In other sectors this would surely be highly regarded and sought after. A valuation premium would follow. But in the auto sector investors seem to prefer action, restructuring, personalities and turnaround stories. Stability – in what is fundamentally an unstable sector – doesn’t seem to have much appeal. It seems that get rich quick schemes beat staying rich strategies,” Warburton said.
Investment researcher Evercore ISI described BMW’s performance as “rock solid”.
Investment bank Nord LB did point to some possible negatives for BMW. It has a high proportion of diesels, there are worries about accusations of diesel emissions manipulation, the so-called real world fuel economy regulations might throw up problems, and the trade dispute between the U.S. and China might hinder profits in Asia, but overall, Nord LB said BMW shares are a “buy”.