Seeking Alpha
Research analyst, long/short equity, tech
Profile| Send Message|
( followers)  

The Daimler Group (DAI) recently announced preliminary earnings results for the second quarter of 2010 in a press release on its website. Based on these results, we estimate a potential 10-15% upside to the $54.17 Trefis estimate for Daimler’s stock. Our analysis follows below.

Mercedes-Benz should outperform

Daimler is a global automotive company based in Germany. It produces cars and trucks under brands such as Mercedes-Benz, Smart, Maybach, and Freightliner. In the luxury vehicle segment it competes with BMW (BMW), Audi (NYSEMKT:NSU) and Toyota’s Lexus (NYSE:TM), among others.

The Mercedes-Benz division is expected to post strong results for the second quarter of 2010. Mercedes-Benz cars and vans constitute 39% of our estimate for Daimler’s stock price. In a previous article, we argued that Mercedes-Benz will drive Daimler’s future growth, and we see no reason to change our forecast.

Daimler’s second-quarter revenue from Mercedes-Benz cars and vans is expected to total €16 billion ($21.7 billion). Projected on a yearly basis, this comes out to $83 billion, higher than our revenue estimate of $77 billion revenues for the division.

We expect this news to boost Daimler’s share value. You can modify our estimates for global Mercedes-Benz sales in the chart below and see the impact on Daimler’s stock price.

Daimler truck and bus sales meet expectations

Daimler is the world’s second-largest truck manufacturer. Daimler trucks and buses are expected to post combined revenue of €7 billion (about $9 billion) in the second quarter. This translates to annual revenue of approximately $37 billion, in line with our forecast.

Daimler to raise outlook

Daimler will raise EBIT guidance for 2010 as part of its second quarter report, scheduled for release on July 27, 2010. Daimler’s previous EBIT guidance was approximately €4 billion ($5.2 billion). We think Daimler can reap reap $5.8 billion EBIT for 2010. We base this expectation on positive sales development in China and the US (the two biggest luxury vehicle markets), the success of the E-class and S-class Mercedes-Benz vehicles, and strong pricing due to euro depreciation of more than 10% since January 1, 2010.

Disclosure: No positions

Source: Daimler’s Q2 Guidance Should Boost Stock