Shares of automaker BMW AG (XTER:BMW, Financial) rose 4.78% on Monday, hitting €75.66 a share in European trading, the largest rally since August 2015 for the company.
The company’s stock is rallying for several reasons, including the release of its November 2018 U.S. sales figures. The report showed that vehicle sales rose 1% compared to the same period last year, hitting 28,330 in November. The rise in sales marks the 13th straight quarter of sales increases.
The company’s Sports Activity Vehicles accounted for 56% of sales, led by sales of the BMW X5 and BMW X3. Electric vehicle sales fell significantly from the same period a year prior, from 2,725 to 2,314 units.
A positive increase in sales raised investor sentiment on Monday followed by a Tweet from President Donald Trump, which helped boost the auto industry as a whole.
“China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%,” tweeted Trump.
The reduction would benefit BMW and other carmakers that produce vehicles in the U.S.
BMW’s stock was not impacted by the announcement from Chief Financial Officer Nicolas Peter on Monday that the company will face significant headwinds in 2019. Peter said that BMW’s operating margin goal will be between 8-10%.
According to Analisa Forex; Tariffs, currency rates and raw materials will weigh on the company in 2019. Expensive emissions technology will also hinder the company’s earnings in 2019.
Warranty issues and goodwill will impact fourth-quarter earnings, according to Peter. China and the U.S., which have been engaged in a trade war, are expected to result in a million-euro charge for the company.
Headwinds are expected to cost the company over $1 billion in 2019.
CEO Harald Krueger is expected to face increasing pressure in 2019 due to a lackluster outlook for the company.
If Trump’s tweet is true, it will significantly reduce the burden on BMW, helping alleviate the costly tariffs in the U.S. and China. Exchange rates will continue to be a concern, with Peter suggesting that commodity prices are expected to continue on their “negative development.”
BMW said that the company does not “necessarily” pass the expense of new technology being installed in vehicles to the consumer. BMW has instead decided to offset the expenses by reducing their engine offerings and trying to reduce costs in other ways.
Disclosure: The author does not have any stake in the listed equities.
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