Daimler Annoys Investors With Belated Profit Warning.
Some Fear Return Of Bad Old “Ignore Investor” Days.
Daimler cut its profit forecast for 2016 because of North American, Brazil and Middle East Truck sales problems, but markets reacted with restraint because the problems were anticipated.
Daimler’s slow decision to warn about the profit problems reminded investors that the company had earned a reputation over the years for being less than frank about significant intelligence regarding prospects.
Daimler said the truck division, which accounted for about a fifth of earnings before interest and tax (EBIT) last year and a quarter of sales, expected profits would fall significantly in 2016.
“Daimler has finally decided to change its unrealistic guidance for trucks, which has not done any good to improve credibility over the last few months,” Citi Research analyst Michael Tyndall said in a report.
Tyndall said he had cut his forecast for Daimler Truck profits in 2016 by 14 per cent, and by three per cent for the whole company.
UBS Global Research said the fall in Daimler’s share price after the news, “already widely expected”, was a good opportunity to buy the shares. Investors had been sceptical about the previous profit forecast for some time.
“We believe the previous optimistic guidance for trucks was an unforced error and could weigh on investor sentiment towards the company,” UBS analyst Patrick Hummel said in a report.
Evercore ISI took a similar line.
“Though we were not massively surprised by the new guidance we question why it has taken management so long to move to incorporate a realistic market guidance that others in the industry had already anticipated quarters ago,” said Evercore ISI analyst Arndt Ellinghorst.