{"id":1491066,"date":"2024-09-20T11:45:00","date_gmt":"2024-09-20T15:45:00","guid":{"rendered":"https:\/\/bugaluu.com\/news\/?p=1491066"},"modified":"2024-09-20T11:45:00","modified_gmt":"2024-09-20T15:45:00","slug":"mercedes-benz-slides-after-china-slowdown-becomes-a-nightmare-amid-profit-warning","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/mercedes-benz-slides-after-china-slowdown-becomes-a-nightmare-amid-profit-warning\/1491066\/","title":{"rendered":"Mercedes-Benz Slides After China Slowdown “Becomes A Nightmare” Amid Profit Warning\u00a0"},"content":{"rendered":"

Mercedes-Benz Slides After China Slowdown “Becomes A Nightmare” Amid Profit Warning\u00a0<\/span><\/p>\n

\n

Mercedes-Benz shares in Germany tumbled on Friday after the luxury carmaker slashed its\u00a0full-year profit outlook. The company warned that\u00a0further deterioration of the macroeconomic environment, specifically in China, was the primary reason vehicle demand softened.\u00a0<\/p>\n

Mercedes has downgraded its outlook for the year, now forecasting\u00a0earnings before interest and taxes (EBIT) to be “significantly below” last year’s levels. The automaker also\u00a0revised its adjusted return on sales forecast to 7.5% to 8.5%, a sharp drop from the prior forecast of 10% to 11%.\u00a0<\/p>\n

“This affected the overall sales volume in China, including sales in the Top-End segment. Overall, the sales mix in the second half of 2024 is expected to remain unchanged versus the first half, and therefore weaker than originally expected,” Mercedes wrote in a statement.\u00a0<\/p>\n

Chief executive Ola K\u00e4llenius informed analysts on a call that sliding vehicle demand\u00a0stemmed “mainly [from] China” but noted slowdowns are materializing in other major markets, such as Europe. He said the carmaker is also being hit by\u00a0“the [impact] of higher interest rates.”<\/p>\n

Shares fell as much as 8.4%\u2014the largest intraday decline since June 2020 and a two-year low\u2014after some analysts said the\u00a0outlook revision was “not that surprising”\u00a0given mounting pressures from China. Other analysts are concerned about the\u00a0company’s share buyback program.\u00a0<\/p>\n

<\/a><\/p>\n

Goldman analysts\u00a0George Galliers and\u00a0Sian Keegan\u00a0provided more color on\u00a0Mercedes’ substantial guidance cut\u00a0for clients this morning. The analyst maintained a ‘Buy’ rating with a price target of 87 euros.\u00a0<\/p>\n

>20% cut to Cars adj. EBIT –<\/strong> Mercedes this evening (19th September) cut its FY2024 guidance, citing weak economic activity and consumption in China. The company negatively revised its Cars adj. EBIT margin target range from 10-11% to 7.5-8.5%. Within this is a c.100bps negative impact from valuation adjustments, with further insights into exactly what this encompasses to be provided during an investor call at 8am CET (7am UK) tomorrow morning. As a result of the cut to the Cars margin target, Mercedes now expects group EBIT to be significantly below (>15%) 2023’s \u20ac19.7bn and industrial free cash flow also to be significantly below (>25%) last year’s \u20ac11.3bn.<\/p>\n

Group downgrades in the magnitude of \u20ac2.4bn or >=15% –<\/strong> Taking the mid-point of the new Cars margin target range and applying it to Visible Alpha Consensus Data revenues, all else equal, implies a downgrade to group EBIT in the magnitude of \u20ac2.4bn or >=15%. We would flag there is incremental risk to the c.15% from downgrades to the top-line, with Mercedes saying that it now expects top-end vehicle mix to be flat in 2H vs. 1H. Nevertheless, on flat mix and, potentially still, stronger volumes given constraints in 1Q, we believe the market will be left with many questions as to why the company looks set to see a c.365bps (c.175bps ex valuation adjustments) sequential decline in margin to c.6% (c.7.9%) in 2H.<\/p>\n

Confidence waning in China –<\/strong> While valuation multiples suggest that investors are anticipating a deterioration in earnings across the European OEM space, we believe many will be surprised by the magnitude of Mercedes’ cut with the company sounding reasonably assured at the end of July. Unlike warnings from BMW and Porsche, Mercedes is attributing the deterioration to the market evolution in China rather than supplier challenges. In our conversations with investors, we note increasing concerns that the China earnings for German OEMs are in a state of permanent decline and that local operations could eventually be loss making in the future.<\/p>\n

“We value Mercedes by applying a P\/E multiple of 7.0x to our 2025E EPS to derive a 12-month price target of \u20ac87. We are Buy rated,” the analysts said.\u00a0<\/p>\n

<\/a><\/p>\n

Here’s what other Wall Street analysts are saying (list courtesy of Bloomberg):\u00a0<\/p>\n

RBC (outperform)<\/strong><\/p>\n

Analyst Tom Narayan says the news is surprising given the size of the cut and the lack of cautionary commentary<\/em>
\n\tSays that while BMW’s warning was due to a specific supplier issue, Mercedes is more ambiguous and calls out general macro weakness in China<\/em><\/p>\n

UBS (buy)<\/strong><\/p>\n

Analysts led by Patrick Hummel say expect meaningful 2025 consensus downgrades on the back of the news, potentially in the 20% range on group Ebit and EPS level<\/em><\/p>\n

Jefferies (buy)<\/strong><\/p>\n

Analysts Philippe Houchois and Michael Aspinall say the magnitude of the cut is surprising<\/em>
\n\tSay the 250 basis-point margin guidance cut to mid-point is largely due to China, “despite the expectation that the JV structure might soften the impact”<\/em><\/p>\n

Oddo (underperform)<\/strong><\/p>\n

Analyst Anthony Dick says China, primarily responsible for the profit warning, is “becoming a nightmare,” and sees a potential structural crisis in the Asian nation, urges caution<\/em><\/p>\n

In August,\u00a0Mercedes posted a 13% decline in new-car registration across the\u00a0European Union. The report also showed that the demand for EVs in Germany crashed<\/a>.\u00a0<\/p>\n

Source: Bloomberg<\/em><\/a><\/p>\n

Across the continent, new car\u00a0registrations tumbled 16.5% compared to a year ago.<\/p>\n

Source: Bloomberg<\/em><\/a><\/p>\n

Just last week, BMW slashed its\u00a0full-year earnings guidance, blaming the downturn in China and sliding EV sales. Earlier this month,\u00a0Volvo Cars offered a dismal outlook and no longer projected 100% all-electric vehicle sales by 2030.\u00a0<\/p>\n

Economy Minister Robert Habeck will host an industry summit in Berlin on Monday to discuss the downturn amid recession threats in Europe’s largest economy.\u00a0<\/p>\n

Maybe the\u00a0success of the German car industry should not be based on EVs.\u00a0<\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nFri, 09\/20\/2024 – 07:45<\/span><\/p>\n

\u200bhttps:\/\/www.zerohedge.com\/markets\/mercedes-benz-slides-after-china-slowdown-becomes-nightmare-amid-profit-warning<\/a>\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

Mercedes-Benz Slides After China Slowdown “Becomes A Nightmare” Amid Profit Warning\u00a0 Mercedes-Benz shares in Germany tumbled on Friday after the luxury carmaker slashed its\u00a0full-year profit…<\/p>\n","protected":false},"author":0,"featured_media":1491067,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1491066","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","wpcat-1-id"],"_links":{"self":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1491066","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/comments?post=1491066"}],"version-history":[{"count":0,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1491066\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/media\/1491067"}],"wp:attachment":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/media?parent=1491066"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/categories?post=1491066"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/tags?post=1491066"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}