Mercedes Raises Profit Estimate But Investors Not Impressed.
“underlying Mercedes Benz margins provide little cause for excitement”
Mercedes parent Daimler, which shocked markets with an early release of better than expected profits, is under pressure from investors despite changing its forecast for 2017 to “significant” earnings growth from “slight”.
Daimler was forced by regulators to announce profits early because they were seriously better than investors had expected. Then, investors were worried by fears future profits would be undermined by huge spending commitments on electric and autonomous cars.
Daimler’s operating profit jumped 87 per cent in the first quarter with earnings before interest and tax (EBIT) rising to €4.01 billion, up from €2.15 billion in the same period of 2016. The Mercedes car subsidiary’s share of the profit rose to €2.23 billion from €1.4 billion.
Berenberg Bank headed its report “Weak underlying earnings quality”, saying Mercedes’ margins provide little cause for excitement.
“Q1 underlying performance was not impressive. We maintain our “sell” rating on Daimler, as underlying Mercedes Benz margins provide little cause for excitement,” Berenberg Bank analyst Alexander Haissl said.
Investment bank Jefferies said the first quarter figures confirmed its concerns about weak underlying margins.
Investment researcher Evercore ISI said the shares had become so cheap, it was almost time to plunge back in, but had this cautionary thought.
“Mercedes Cars has something to prove for the rest of this year, namely that there is still underlying operational leverage left at this stage of the market and its product cycle,” analyst Arndt Ellinghorst said.