Daimler Rises as Profit Surprises and Mercedes Seals Sales Lead

  • Carmaker confident of reaching full-year operating-profit goal
  • Second-quarter charges include air-bag recalls and legal costs

Daimler AG rose the most in three weeks after the company solidified its lead in the luxury-car market and said it’s confident of reaching this year’s underlying profit goals, despite more than 1 billion euros ($1.1 billion) in one-time costs in the second quarter.

Adjusted earnings before interest and taxes rose 5.6 percent to 3.97 billion euros in a preliminary tally, “significantly” beating analyst expectations, the automaker said in a statement. Daimler benefited from gains in vans and buses while earnings dropped at the trucks and the Mercedes Cars division. The result excludes almost 500 million euros in Takata Corp. air-bag recalls as well as 400 million euros for legal costs that Daimler didn’t explain.

The charges are outweighed by the carmaker sticking to its forecast, which now looks more achievable, analysts at Goldman Sachs wrote in a note to investors Tuesday. Locked in a race for luxury-market leader with BMW AG and Audi, Mercedes has been in the process of rejuvenating its fleet, including a new version of the business-focused E-Class sedan in March. The carmaker was ahead of both rivals in sales through June.

Daimler rose 4.5 percent, the most since June 20, to 57.71 euros at 10:28 a.m. in Frankfurt. The stock has lost 26 percent this year, compared to a 7 percent drop in the benchmark DAX Index.

“The stronger than expected result was driven by the strong performance in the cars division,” said Arndt Ellinghorst, a London-based analyst with Evercore ISI who has a sell rating on the shares. “Just when Brexit has increased macro risks and Daimler has just recently warned on its trucks outlook, Daimler delivers a material beat.”

Legal Challenges

Daimler’s legal challenges include a lawsuit in the U.S. claiming that its BlueTec diesel vehicles violate clean-air standards when run at cooler temperatures. The carmaker declined to comment on whether the legal costs are linked to that suit, which it has called “baseless.” Germany’s antitrust regulator also raided Daimler’s offices last month in a probe of steel purchasing by the auto industry.

The company stuck to its forecast for full-year earnings, saying they will improve slightly from 2015. Among the divisions, the heavy-truck unit is still expected to see Ebit sink significantly below last year’s level, while that of the vans division is seen significantly above.

Adjusted Ebit at the Mercedes-Benz Cars unit fell 1.1 percent to 2.21 billion euros in the second quarter. Mercedes adjusted the value of its inventory by 284 million euros in the period.

The marque’s sales jumped 12 percent this year through June to just over 1 million cars, more than double growth at Volkswagen AG’s Audi, where deliveries rose 5.6 percent. BMW-brand sales increased 5.8 percent to 986,557 vehicles.

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