Daimler has set the bar excessive for the automotive sector’s coming outcomes season—maybe too excessive.
The maker of Mercedes-Benz DMLRY 5.31% automobiles unveiled a lot better-than-expected third-quarter numbers, in a shock replace forward of its full earnings report subsequent week. Working earnings got here in at roughly €3.1 billion, equal to $3.6 billion, one of the best end in 2½ years. Most surprisingly, free money flows from the core automotive enterprise totalled €5.1 billion, boosted by pandemic-related cash-preservation measures and a fats dividend from Daimler’s Chinese language three way partnership.
Partly, the replace—and the 5% leap in Daimler inventory it triggered Friday morning—will be taken as a bullish sign for your entire sector, most of which experiences third-quarter numbers over the approaching three weeks. However solely partly.
Automobile gross sales have been very strong this summer as shoppers have shunned public transport and brought benefit of low rates of interest and authorities stimulus cash. Restricted inventories following spring manufacturing closures have additionally stored discounting in examine. Traders are seemingly anticipating most corporations to beat cautious forecasts, however Daimler’s outcomes present there may be nonetheless room for them to be genuinely stunned.
Nevertheless, Daimler isn’t typical in two essential methods. One is its publicity to China, the market recovering quickest from the pandemic, significantly on the luxurious finish. Within the third quarter, the corporate bought nearly 4% extra Mercedes-Benz autos than in the identical interval final yr, largely because of a 23% leap in China. Gross sales in Europe have been roughly flat, whereas they fell 9% within the U.S. Daimler’s native rivals BMW and Volkswagen equally have more to gain than most international auto makers from the Chinese language rebound.