BMW Joins VW, Daimler Beating Estimates as Porsche Gains
Germany’s car industry has confounded analyst predictions, again.
Bayerische Motoren Werke AG (BMW), the world’s largest maker of luxury autos, became the third of the nation’s top three carmakers to beat analyst estimates with a 19 percent increase in first-quarter profit. Volkswagen AG (VOW) and Daimler AG (DAI) last week also said earnings rose, countering expectations for a decline.
Carmakers and their suppliers are the best performing shares in Europe this year as demand for BMW, Mercedes and Audi models thrives in the U.S. and China. The thirst for German nameplates shows little sign of abating with new models including the VW Golf, the Audi A3 and the Mercedes-Benz A-Class all coming to market later in the year.
“For BMW and Volkswagen I see a high probability that they will raise forecasts after the second quarter,” said Juergen Pieper, a Frankfurt-based analyst at Bankhaus Metzler. “In fact, I pretty firmly expect them to do so.”
Munich-based BMW said demand for the revamped 1-Series model fueled record deliveries and maintained its forecast of an increase in pretax earnings after a record in 2011. The stock rose as much as 2.88 euros, or 4.1 percent, to 73.95 euros, bringing the advance so far this year to 43 percent.
BMW’s auto unit posted earnings before interest and taxes of 11.6 percent of sales, down from an 11.9 percent margin a year ago. That beat Audi’s 11.4 percent return on sales and Mercedes’s 8.4 percent. BMW’s auto deliveries rose to a record 425,528 vehicles in the first quarter from 382,758 a year earlier, as 1-Series sales climbed 20 percent and the X3 SUV surged 55 percent.
Porsche AG, which is combining with VW, also reported an increase in first-quarter profit today, with Ebit gaining 18 percent. The Stuttgart, Germany-based company said sales of its revamped 911 model and Panamera four-door coupe led a 32 percent increase in revenue for the period.
Analysts had expected the first quarter to be the weakest this year for the German carmakers because of cooling demand in China and investments in new models and factories, such as Daimler’s 800 million-euro new plant in Hungary.
Volkswagen provided the biggest surprise, reporting a 10 percent increase in operating profit for the first quarter, compared with an 8.6 percent decline predicted by analysts on demand for models from its Audi luxury brand. The stock surged 8.7 percent on April 26. VW shares have almost doubled in the past five years.
Wolfsburg, Germany-based VW is thriving even amid Europe’s debt crisis and is taking market share from rivals with a model lineup that runs from the Up! subcompact to Lamborghini sports cars and 50-ton trucks.
The VW group, whose brands also include Skoda and Seat, increased first-quarter deliveries 9.6 percent to 2.16 million vehicles. The gains compare with revenue declines at PSA Peugeot Citroen and Renault SA (RNO) and wider European losses at Fiat SpA.
“Because Germany is up in April, their mix is helped as it is by far their most important market, more than ten times more important than the Spanish, French and Italian markets individually,” said Adam Hull, a London-based analyst at WestLB. “What they’re being helped by is strong exports to China, Germany holding up, and the U.S. market growing very strongly.”
Hull, who rates BMW “neutral” and recommends buying VW, Porsche and Daimler, said he expects the rate of sales growth to slow in coming quarters as the pace of Chinese demand slips.
Daimler, the owner of Mercedes-Benz cars, also trumped expectations. The company on April 27 reported an unexpected 4.9 percent increase in first quarter profit and stuck to its goal of matching last year’s 9 billion euros in operating profit.
By the end of the decade, Daimler aims to recapture its leading position among the luxury-car makers, pursuing the same goal as Audi. Mercedes is investing to put 10 completely new models on the market by 2015 to rejuvenate the brand, including converting the A-Class compact into a sportier car. The brand has a target by that year of delivering 1.6 million vehicles.
Mercedes regained the U.S. luxury-vehicle sales lead for the year over the BMW brand, with April deliveries rising 24 percent. The two German companies, which overtook Lexus last year, are vying for this year’s U.S. sales crown.
“We are taking advantage of our earnings power to make targeted investments,” BMW Chief Financial Officer Friedrich Eichiner said today. Additional spending of 800 million euros to 1 billion euros this year to improve fuel efficiency “will secure us a stronger market position in the future.”