While Daimler’s profit surges, Mercedes earnings margin dissapoints image

Daimler AG, which is parent to Mercedes-Benz, which is now third placed among the global luxury makers, reported huge increases in profit and sales.

But not all roses are red and smelling good, as the car division – although it thoroughly increased sales on China and US gains, also reported a smaller than expected first-quarter profit margin – coming short of analysts forecasts.

For example, Mercedes-Benz’s EBIT – earnings before interest and taxes – margin was of 7% of sales, smaller than some analysts expected and behind Volkswagen Audi unit, which earns 10.1%.

“For Mercedes still to be only doing 7 percent margins in a really top quarter for the S-Class is a little bit disappointing,” said Harald Hendrikse, an analyst with Nomura Holdings in London. The company “needs to cut more costs”.

“The sentiment on auto stocks in general has turned rather negative,” said Juergen Pieper, an analyst with Bankhaus Metzler in Frankfurt. “Investors are more skeptical and cautious and are fishing for problems.”

Daimler has problems with Mercedes-Benz because of new model investments – it’s releasing 30 Mercedes models by the end of the decade, with 12 brand new and the automaker targeting cost cuts of 2 billion euros ($2.8 billion) by the year’s end.

Via Bloomberg