Daimler Heads to $82 on Higher Benz Sales and China Growth

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Daimler AG (ETR:DAI) logged one of the highest quarterly earnings in its history in Q2 led by strong Mercedes-Benz sales, which benefited from numerous model changes and new products. Daimler's planned product launches for the rest of the year promise to make 2011 a record-year for the company as we expect sales to surpass the 1.9 million vehicles sold in 2010. Daimler brands such as Mercedes-Benz, Smart, Maybach and Daimler compete globally with the likes of BMW (GR:BMW), GM ( GM ), Ford ( F ),  Honda ( HMC ) and Toyota( TM ) among others.

We have raised our price estimate of $82.70 for Daimler's stock , which is about 30% above market price. The biggest factors in our near 30% price estimate increase came from upward revisions to gross margin forecast.

New Mercedes-Benz Models Will Chip in

We believe that Mercedes-Benz's refreshed product line will continue to drive demand for the brand. Over the rest of the year, numerous new models in the C-Class segment and continuing market success of the S-Class will drive sales.

The new-generation C-Class sedan and station wagon as well as the new SLK roadster have helped sales since late March 2011. Models released this summer and the remainder of the year will also contribute to sales.  The C-Class coupe will start being delivered in June as well as those like the M-Class that will start being delivered in September and the roadster version of the Mercedes-Benz SLS AMG that starts deliveries in the fourth quarter. Mercedes-Benz will also compete in the compact-car segment through the new B-Class, which will be launched in November.

The launch of the new Sprinter will aid to the growth of Mercedes-Benz vans in U.S. and China. Also the increased production capacity in Argentina is likely to boost sales of vans.

China Helps Fuel Growth

In the first half of this year, Mercedes-Benz was able to grow its sales substantially in several emerging economies, including in China its third largest market overall due to rapid economic expansion, increasing disposable income, new models such as the C-class coupe (launched in May'11). Its strong brand recognition and association with luxury has a strong influence in China.

Daimler continues to expand its presence in China. Towards the end of Q2, Daimler agreed to invest 2 billion Euros (about $2.9 billion) along with its joint venture partner BAIC. The investment is for setting-up a R&D center, an engine plant and facilities for local production of several compact cars and GLK SUV in China. This will help the brand continue its rapid growth in China.

Need to Watch Materials Costs

Daimler's automotive margins will remain under pressure due to increasing commodity prices and higher material and product-related costs. Also SG&A expenses is likely to increase to support the new product launches at Daimler.

You can drag the trend lines in the modifiable charts above to see the impact of these trends on Daimler's stock value.

See our full analysis for Daimler's stock here .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: F , GM , HMC , TM

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