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Graham Griffin
Graham Griffin
Articles (107) 

Mercedes-Benz Parent Daimler Reports Solid 3rd-Quarter Earnings Despite Sales Slump

Rising sales in China support slow recovery

October 23, 2020 | About:

On Friday, Mercedes-Benz manufacturer Daimler AG (XTER:DAI) reported increased earnings year over year for the third quarter of 2020.

Reported earnings per share came out to 1.92 euros ($2.28), up 19% from 1.61 euros per share the year prior. Decreased revenues at 40.28 billion euros were 7% lower than the year prior due to continual economic struggles from the ongoing pandemic.

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The company's interim report for the third quarter claims sales markets showed a significant revival compared to the second quarter. Sales numbers remained low at 772,703 units, down 8% from the year-prior quarter at 839,326. However, the company did see an increased demand for mid- to large-size vans. Sales of Mercedes-Benz vans increased around the world excluding China and Latin America.

Overall passenger car sales were down across the Mercedes-Benz and smart brands at 566,600 compared to 604,700 units sold last year. In China, Mercedes-Benz's largest market, sales exploded 23% to 213,800 units on the heels of economic recovery.

Daimler CEO Ola Källenius said there was anecdotal evidence that Chinese families had turned to luxury goods and vehicles at home due to the inability to take vacations according to Reuters. However, the positive outlook was cautioned as it operates under the assumption that conditions will continue to normalize despite rising infection rates over the last month.

Overall, Daimler's report leans heavily into the uncertainty of infection rates and recovery moving into the future. They expressed a strong expectation that overall demand for vehicles across their brands will remain low throughout 2020 despite the generalized recovery that has occurred in the third quarter.

The company has discreetly begun its own efforts to transition toward carbon-neutral vehicles alongside its history with its smart brand vehicles. New vans and trucks with electric power plants have begun to reach the market with a widespread transition looming in the future. Analysts have praised the company for maintaining high margins while selling an increased number of electric vehicles which offer up lower levels of profitability.

As of Oct. 23, Daimler stock was trading at 47.91 euros per share with a market cap of 51.25 billion euros. The GF Value Line shows the stock is currently trading at a fairly valued rating as share prices continue to recover from earlier this year.

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Disclosure: Author owns no stocks mentioned.

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