Company Reports

Narrow-moat Mercedes-Benz reported disappointing first-quarter earnings as macroeconomic pressures had an impact on results, driving shares down roughly 5% intraday on April 30. First-quarter sales and earnings per share fell short of FactSet consensus estimates by 8% and 2.4%, respectively. Despite near-term headwinds, our long-term outlook is unchanged, and we reiterate our EUR 117 per share fair value estimate.

The highly regarded Mercedes-Benz brand is one of the top premium and luxury automobile names in the world. The firm is also a European leader in commercial vans. Even so, Mercedes faces stiff competition in all of its markets. The company operates in the cyclical, capital-intense, highly competitive passenger vehicle industry where changes in unit volume can create large swings in operating leverage, raw material commodity costs can be volatile, and unionized labor can be expensive.

The highly regarded Mercedes-Benz brand is one of the top premium and luxury automobile names in the world. The firm is also a European leader in commercial vans. Even so, Mercedes faces stiff competition in all of its markets. The company operates in the cyclical, capital-intense, highly competitive passenger vehicle industry where changes in unit volume can create large swings in operating leverage, raw material commodity costs can be volatile, and unionized labor can be expensive.

Narrow-moat-rated Mercedes-Benz reported fourth-quarter earnings per share of EUR 2.99, EUR 0.34 better than the EUR 2.65 FactSet consensus but down EUR 0.73 from EUR 3.66 last year. Supply chain disruption (chips, logistics) kept consolidated volume relatively flat, down only 0.9% to 511,000 units from 515,000. Group revenue slipped 2% to EUR 40.3 billion from EUR 41.0 billion a year ago but beat consensus by 3%. Generally, pricing was favorable except for battery electric vehicle where competition has intensified. Mix was slightly unfavorable as entry product volume increased while top-end was flat and core declined slightly.

The highly regarded Mercedes-Benz brand is one of the top premium and luxury automobile names in the world. The firm is also a European leader in commercial vans. Even so, Mercedes faces stiff competition in all of its markets. The company operates in the cyclical, capital-intense, highly competitive passenger vehicle industry where changes in unit volume can create large swings in operating leverage, raw material commodity costs can be volatile, and unionized labor can be expensive.

Mercedes-Benz reported third-quarter earnings per share of EUR 3.44, EUR 0.23 better than the EUR 3.21 FactSet consensus but down EUR 0.22 from EUR 3.66 last year. Supply chain disruption (chips, logistics) kept consolidated volume relatively flat, up only 0.2% to 454,000 units from 453,000. Group revenue slipped 1% to EUR 37.2 billion, from EUR 37.7 billion a year ago, but was just a hair above consensus by EUR 23 million. Generally, pricing was favorable except for battery electric vehicle where competition has intensified. Mix was slightly unfavorable, as top-end product volume declined slightly more than core and entry.

The highly regarded Mercedes-Benz brand is one of the top premium and luxury automobile names in the world. The firm is also a European leader in commercial vans. Even so, Mercedes faces stiff competition in all of its markets. The company operates in the cyclical, capital-intense, highly competitive passenger vehicle industry where changes in unit volume can create large swings in operating leverage, raw material commodity costs can be volatile, and unionized labor can be expensive.

After reviewing Mercedes-Benz’s economic moat, we have upgraded our rating to narrow from none based on the strength of the brand and the firm’s intellectual property, both within the intangible asset moat source. We have been monitoring the development of the firm’s ROICs since the spinoff of Daimler trucks on Dec. 1, 2021, which is much more capital intensive than the light-vehicle business. We raised our fair value estimate to EUR 116 from EUR 111 with EUR 3 of the increase coming from the time value of money and EUR 2 coming from changes to our model to reflect our narrow moat rating. The 5-star shares of Mercedes-Benz currently trade at a compelling 44% discount to our new fair value.

The highly regarded Mercedes-Benz brand is one of the top premium and luxury automobile names in the world. The firm is also a European leader in commercial vans. Even so, Mercedes faces stiff competition in all of its markets. The company operates in the cyclical, capital-intense, highly competitive passenger vehicle industry where changes in unit volume can create large swings in operating leverage, raw material commodity costs can be volatile, and unionized labor can be expensive.

Mercedes-Benz reported second-quarter earnings per share of EUR 3.34, EUR 0.18 better than the EUR 3.16 FactSet consensus and up EUR 0.43 from EUR 2.91 last year. With improved chip availability, albeit still disrupting output, consolidated volume increased 5% to 484,000 units from 463,000. Group revenue rose 7% to EUR 38.2 billion from EUR 36.4 billion a year ago, 1% shy of consensus. Price and mix were positives as the firm focuses on top-end luxury expansion. Second-quarter group adjusted EBIT was EUR 5.2 billion for a 13.6% margin versus EUR 4.9 billion and a 13.6% margin last year, beating consensus of EUR 4.9 billion by 6%. Industrial margin was supported by volume, price, and mix but partially offset by inflationary cost pressure and increased research and development while higher interest rates dented the financial-services margin.

The highly regarded Mercedes-Benz brand is one of the top premium and luxury automobile names in the world. The firm is also a European leader in commercial vans. Even so, Mercedes faces stiff competition in all of its markets. The company operates in the cyclical, capital-intense, highly competitive passenger vehicle industry where changes in unit volume can create large swings in operating leverage, raw material commodity costs can be volatile, and unionized labor can be expensive.

Mercedes-Benz Group reported first-quarter earnings per share of EUR 3.69, EUR 0.53 better than the EUR 3.16 FactSet consensus and up EUR 0.43 from EUR 3.26 per share last year. With improved chip availability versus first-quarter 2022, albeit still disrupting output, total volume increased 5% to 602,000 units from 576,000. Group revenue rose 8% to EUR 37.5 billion from EUR 34.9 billion a year ago, beating the consensus by EUR 125 million. Price and mix were major contributors as the firm focuses on top-end luxury expansion. First-quarter group adjusted EBIT was EUR 5.4 billion for a 14.5% margin versus EUR 5.3 billion and a 15.2% margin last year. Car and van segment margin was dinged by inflationary cost pressure and increased R&D spending, while higher interest rates dented financial services margin. Despite lower year-over-year margin, adjusted EBIT still beat consensus by 12%.

The highly regarded Mercedes-Benz brand is one of the top premium and luxury automobile names in the world. The firm is also a European leader in commercial vans. Even so, Mercedes faces stiff competition in all of its markets. The company operates in the cyclical, capital-intense, highly competitive passenger vehicle industry where changes in unit volume can create large swings in operating leverage, raw material commodity costs can be volatile, and unionized labor can be expensive.

The highly regarded Mercedes-Benz brand is one of the top premium and luxury automobile names in the world. The firm is also a European leader in commercial vans. Even so, Mercedes faces stiff competition in all of its markets. The company operates in the cyclical, capital-intense, highly competitive passenger vehicle industry where changes in unit volume can create large swings in operating leverage, raw material commodity costs can be volatile, and unionized labor can be expensive.

Mercedes-Benz Group reported fourth-quarter earnings per share of EUR 3.72, EUR 0.45 better than the EUR 3.27 FactSet consensus and up EUR 1.55 from last year's EUR 2.17. With improved chip availability versus fourth-quarter 2021, still disrupting output, total global volume jumped 8% to 659,000 units from 612,000. Group revenue rose 16% to EUR 41.0 billion from the prior year's EUR 35.2 billion, beating the consensus by 8%. Price and mix were major contributors as the firm focuses on top-end luxury expansion. Fourth-quarter group adjusted EBIT was EUR 5.1 billion for a 12.4% margin versus EUR 5.0 billion and a 14.3% margin last year. Despite lower year-over-year margin, adjusted EBIT was 4% better than consensus.

Daimler AG completed the spinoff of its truck and bus operations on Dec. 10, 2021 and changed its name to Mercedes-Benz Group AG on Feb. 1, 2022. In 2021, the truck and bus business, now called Daimler Truck AG, accounted for 20% of consolidated revenue including discontinued operations and 11% of group adjusted EBIT. The remaining operations of Mercedes-Benz Group include premium and luxury passenger vehicles and light commercial vans as well as Mercedes-Benz Mobility, which includes financial services and other mobility services like ride-hailing.

Mercedes-Benz plans to launch a global branded electric vehicle charging network this year with aims to reach 10,000 high-power chargers in service before 2030. The network will focus on Mercedes owners with preferential pricing and access, but will also be open to other automaker brands with compatible technology. Charging locations will be built in the U.S. and Canada first, followed by Europe, China, and other regions. By 2027, the firm expects to have 400 locations and 2,500 chargers operational in North America with support from partners ChargePoint and MN8 Energy. We suspect the early focus on the U.S. results from government funding made available through the recently enacted infrastructure law that sets aside $5 billion for investment in fast-charging stations.

Mercedes-Benz Group reported third-quarter earnings per share of EUR 3.66, EUR 0.48 better than the FactSet consensus and up EUR 1.92 from a year ago. With improved chip availability versus the prior year when the shortage was at its worst, total volume jumped 35% to 634,000 units from 471,000. Consolidated revenue rose 19% to EUR 37.7 billion from EUR 31.6 billion in the prior year. Price and mix were major contributors as the firm continues to allocate chips to higher margin vehicles and focus on top-end luxury expansion. Third-quarter group adjusted EBIT was EUR 5.3 billion for a very healthy 14.2% margin versus EUR 3.1 billion and a 9.8% margin last year, showing an impressive 240 basis point expansion.

Daimler AG completed the spinoff of its truck and bus operations on Dec. 10, 2021 and changed its name to Mercedes-Benz Group AG on Feb. 1, 2022. In 2021, the truck and bus business, now called Daimler Truck AG, accounted for 20% of consolidated revenue including discontinued operations and 11% of group adjusted EBIT. The remaining operations of Mercedes-Benz Group include premium and luxury passenger vehicles and light commercial vans as well as Mercedes-Benz Mobility, which includes financial services and other mobility services like ride-hailing.

Mercedes-Benz Group reported second-quarter earnings per share of EUR 2.91, EUR 0.08 better than the FactSet consensus and up EUR 0.07 from a year ago. Due to the Ukraine crisis, chip shortage, and China COVID-19 lockdown, total volume dipped 5% to 587,000 units from 620,000. Despite the volume decline, consolidated revenue increased 7% to EUR 36.4 billion from EUR 34.1 billion in the prior year. Price and mix were major contributors as the firm allocated chips to higher margin vehicles and focused on top-end luxury segment expansion. Second quarter group adjusted EBIT was EUR 4.9 billion for a very healthy 13.6% margin versus EUR 4.6 billion and a 13.4% margin last year, showing an impressive 20 basis point expansion despite lower volume and higher input costs.