Mercedes Slides On Profit Plunge, Weak Car Guidance
Mercedes shares declined in Germany on Thursday after the struggling automaker reported a nearly one-third drop in 2024 profits, pressured by softening demand in China and sluggish electric vehicle sales. Analysts at Bernstein characterized the 2025 outlook for passenger cars as 'predictably weak.'
Here's a snapshot of the 2024 fiscal year financial results. The focus is on deteriorating EBIT margin (courtesy of Bloomberg): Ebit EU13.60 billion, -31% y/y
Dividend per share EU4.30 vs. EU5.30 y/y, estimate EU4.32
Profit EU10.41 billion, -28% y/y, estimate EU9.87 billion
Sales EU145.59 billion, -4.5% y/y, estimate EU145.85 billion
Industrial free cash flow EU9.15 billion, estimate EU8.49 billion
Vans adjusted return on sales 14.6% vs. 15.1% y/y, estimate 14.8%
Vans adjusted Ebit EU2.83 billion, estimate EU2.87 billion
Mercedes announced plans to slash 10% of production costs through 2027 and provided a dismal outlook for this year. It expects lower sales and guided profit margins lower than Wall Street's expectations…
2025 Forecast: Sees Cars adjusted return on sales 6% to 8%, estimate 7.91% (Bloomberg Consensus)
Sees Vans adjusted return on sales 10% to 12%, estimate 12.8%
'To ensure the company's future competitiveness in an increasingly uncertain world, we are taking steps to make the company leaner, faster and stronger,' CEO Ola Kallenius wrote in a statement.
With CEO Kallenius at the helm, Mercedes has prioritized producing higher-end vehicles while shifting away from entry-level models. There was a time—many years ago—when the automaker focused on building cars for executives. However, weak demand for Maybachs and G-Wagons in China and other markets has pressured this strategy.
Kallenius expects margins margins upwards of 10% by 2027. Like many others in Europe, automakers have been pressured by weakening global demand, a dismal economic environment in Germany, and Chinese competitors such as BYD. At the same time, trade tensions with the US are another headwind for EU automakers.
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