BMW Earnings: Revenue and Profitability Improve as Chip Shortage Impact Lessens

Narrow-moat BMW reported first-quarter earnings per share of EUR 5.31, beating the EUR 4.34 FactSet consensus EPS estimate by EUR 0.97 but down EUR 10.02 from EUR 15.33 EPS reported last year when the firm recorded a EUR 7.7 billion gain from the consolidation of BMW Brilliance Automotive. Automotive volume decreased 2% as the chip crunch lessened but weaker demand in Europe and China offset higher sales volume in the Americas. Despite the lower sales volume, automotive revenue rose 17% on the consolidation of BMW Brilliance Automotive (formerly joint venture equity income) as of Feb. 11, 2022, strong pricing, and favorable mix. Consolidated revenue increased 18% to EUR 36.9 billion from EUR 31.1 billion on the 17% automotive increase, a 17% increase in motorcycle revenue, a 4% rise in financial services, but a 14% reduction in eliminations. Group revenue beat the FactSet consensus by about 4%.

Automotive EBIT was strong at EUR 3.8 billion, jumping 60% from EUR 2.3 billion, while margin expanded 3.2 percentage points to 12.1% from 8.9% a year ago, despite the chip shortage, the Ukraine crisis, higher raw material costs, logistics disruption, and other inflationary cost pressures. Even so, due to increased interest rates, financial services EBIT was EUR 958 million, down EUR 8 million or 1%, from EUR 966 million last year. Excluding last year’s one-time gain, group profit before tax rose 12% to EUR 5.1 billion from EUR 4.6 billion last year on the strength of automotive EBIT. BMW also announced a second EUR 2.0 billion share buyback program.

Management’s unchanged 2023 guidance includes slightly higher automotive volume and automotive EBIT margin at 8%-10%. We forecast a 3% increase in 2023 automotive volume, a 2% increase in consolidated revenue, and an 8% industrial EBIT margin due to the risks from continuing headwinds. The 4-star-rated shares of BMW trade at an attractive 35% discount to our unchanged EUR 157 fair value estimate.