BMW Shares Surge to Record High on 2014 Profit ForecastChristoph Rauwald
Bayerische Motoren Werke AG, the world’s biggest maker of luxury autos, surged to a record high after forecasting a significant gain in 2014 profit as models like the 4-Series Gran Coupe and i8 sports car propel sales.
Pretax profit will rise by at least a high single-digit percentage above 2013’s 7.91 billion euros ($11 billion), Chief Financial Officer Friedrich Eichiner said today at the annual press conference in Munich. Earnings will be lifted by 16 new and refreshed models and lower development spending.
“BMW gave a surprisingly positive outlook,” said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler, who recommends buying the shares. “They seem to be getting out of a phase of stagnation quicker than expected.”
Competition among Germany luxury-car makers is heating up as Volkswagen AG’s Audi division, which ranks second in the segment on an annual basis, outsold BMW’s namesake brand in the first two months of 2014. Daimler AG’s Mercedes-Benz, which holds third place, has boosted deliveries faster than the two larger rivals in recent months. BMW said today that sales gains should be stronger in the second half.
“We will remain the world’s leading premium car company” this year, Chief Executive Officer Norbert Reithofer said today at a press conference at BMW’s headquarters in Munich. “We remain very confident about the business year 2014,” with sales volumes set for a “significant increase.”
The shares advanced 5.88 euros, or 7.3 percent, to 86.60 euros to close at their highest price since the company first listed in 1926. The stock has climbed 25 percent over the past 12 months, valuing the automaker at 55.4 billion euros.
BMW will rein in spending on research and development after investing 4.8 billion euros in 2013, the equivalent of about 6.3 percent of revenue last year. Development outlays this year should “move toward” the company’s target range of 5 percent to 5.5 percent, Eichiner said.
BMW has ramped up spending in recent years to fend off Audi and Mercedes, which both plan to take the luxury-sales crown by the end of the decade. The three German manufacturers are also facing a challenge from expansion by smaller producers of upscale vehicles, including Tata Motors Ltd.’s Jaguar Land Rover and Fiat SpA’s Maserati. BMW may announce plans as soon as next week to expand its U.S. factory, production chief Harald Krueger said today.
“The continuous investment in innovations ensures our long-term success,” Reithofer said. When the company turns 100 years old in 2016, “we will not be looking in the rear-view mirror but focusing on the road ahead.”
Audi, which has never held the top luxury-car sales post for an entire year, will introduce 17 new or revamped vehicles in 2014, including a remake of the iconic TT sports car. Stuttgart-based Mercedes is rolling out 30 autos by the end of the decade, including a dozen all-new cars.
BMW is responding with the upgraded X5 sport-utility vehicle introduced in November and the revamped X3 SUV, 2-Series Active Tourer hatchback and i8 plug-in hybrid sports car coming out this year. The Munich-based automaker said it already has a six-month order backlog for the i8.
BMW, which also owns the Mini and Rolls-Royce brands, is forecasting that group sales will exceed 2 million autos for the first time in 2014, achieving the target two years earlier than planned.
IHS Automotive estimates the BMW nameplate will sell 1.77 million cars this year, beating 1.66 million deliveries at Ingolstadt-based Audi and 1.56 million at Mercedes. That would make BMW the best-selling luxury marque globally for the 10th straight year.
Fourth-quarter earnings before interest and taxes rose 4.2 percent from a year earlier to 1.95 billion euros. Automotive earnings narrowed to 9.2 percent of sales from 10.6 percent in the 2012 period.
The full-year margin from carmaking in 2013 was 9.4 percent, compared with 10.1 percent at Audi and 6.2 percent at Mercedes. BMW expects the margin this year to be between 8 percent and 10 percent.
Group deliveries gained 6.4 percent last year because of a 23 percent jump for the best-selling 3-Series line to more than 500,000 autos. The model faces stiffer competition this year with Mercedes upgrading the C-Class.