Here’s What’s Helping Daimler Offset a Slump with Trucks

October 21, 2016, 8:54 AM UTC
The 2016 Paris Motor Show Day Two
The new Mercedes-Benz Generation EQ concept sport-utility vehicle (SUV), sits on display during the second press day of the Paris Motor Show at Porte de Versailles exhibition center in Paris, France, on Friday, Sept. 30, 2016. Ford Motor Co. and Rolls-Royce are among the companies skipping the car show, also known as Mondial de L'Automobile, as the once-unmissable event succumbs to changes sweeping the auto industry. Photographer: Marlene Awaad/Bloomberg via Getty Images
Marlene Awaad/Bloomberg via Getty Images

Daimler‘s third-quarter operating profit rose 23% as higher earnings from passenger cars offset falling demand for trucks, helping the group to keep to its forecast for higher annual profit.

Earnings before interest and tax (EBIT), adjusted for special items, climbed to 4.01 billion euros ($4.37 billion) in the three months through September, above the 3.8 billion euros forecast in a Reuters poll mainly thanks to margin improvement at the Mercedes-Benz cars division.

However, falling demand for trucks in North America and a slump in sales in markets like Brazil forced Daimler (DDAIF) to lower its full-year forecast for revenue.

Instead of expecting a slight increase in revenue, the Stuttgart-based company said it now expects it to remain flat, sending its shares more than 2.5% lower in early trade.

Daimler‘s turnaround of the Mercedes brand has been exceptional but we feel that this is well understood and leaves little room for positive surprises or indeed unrecognized earnings momentum,” Arndt Ellinghorst, analyst at Evercore ISI, said in a note on Friday.

Swedish truckmaker Volvo on Friday forecast a slide in heavy-duty truck markets on both sides of the North Atlantic next year.

Daimler said the return on sales at Mercedes-Benz Cars rose to 11.4%, from 10.4% in the year-earlier period, thanks to sales of the new E-class and demand for sports utility vehicles.

Mercedes wants to overtake German rival BMW to claim the title of biggest selling luxury carmaker.

The profitability of the Mercedes-Benz Cars division rose 23%, helped by an 11% increase in car sales that was driven by demand for sports utility vehicles and the new E-Class.

However, Daimler Trucks and Daimler Buses could not match the prior-year quarter’s earnings, in part due to a sharp fall in demand in key markets like Brazil.

Daimler nonetheless stuck with its group forecast for adjusted full-year group profit (EBIT) to slightly beat 2015 levels.