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Mercedes Earnings Rally Expected To Continue

Mercedes Earnings Rally Expected To Continue.

Possible Worry That China Might Disappoint Dismissed.

Mercedes parent Daimler impressed investors with its third quarter performance, and the future looks good not least because worries about China have been overdone, according to investment advisor Evercore ISI.

Daimler’s third quarter net profit actually slipped to €2.39 billion from €2.74 billion in the same period of 2014, but the previous year’s numbers were inflated by an extraordinary gain of €1.01 billion for the sale of a stake in a venture with aero-engine maker Rolls Royce.

Daimler also reaffirmed revenue and profit for the full year will gain “significantly”.

Evercore ISI analyst Arndt Ellinghorst said what he called “China hysteria” has been overdone.

“We are sticking with our view that the Chinese consumer is fine,” Ellinghorst said.

“Our ’16 forecast for China car sales remains +5 per cent year on year. Premium car sales will more likely grow in the area of 5-10 per cent, which implies that earnings contributions from China will increase,” he said.

Ellinghorst said Mercedes will continue to make more than a 10 per cent margin next year, helped by the launch of the new E class, which goes on sale in Europe in March and the U.S. in June. The E class contributes between 20 and 30 per cent of Mercedes EBIT depending on the life cycle stage, according to Ellinghorst.

“The E class is the last of Mercedes’ old generation products that is being replaced with a materially overhauled version, and this should add about €500 million to EBIT in 2016,” he said.

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