On Tuesday, Barclays (LON:BARC) issued a downgrade for Mercedes-Benz (OTC:MBGAF) Group (MBG:GR) (OTC: DDAIF) stock, shifting its rating from Equalweight to Underweight. The investment firm also adjusted the price target for the automaker to €48.50, a decrease from the previous target of €65.00.
In the third quarter of 2024, Mercedes-Benz guided for an EBIT margin of 6-7% for its car division in the fourth quarter, with expectations of fewer one-offs, higher volume, and a slightly improved mix of traditional and electric vehicles (TEVs). This guidance came after the company reported a 4.7% EBIT margin for its cars in the third quarter of 2023.
However, the outlook suggested that the fourth quarter of 2024's performance might set a precedent for the financial years 2025 and 2026, hinting at a "new normal" level of profitability. The company's forward-looking statements indicated potential challenges, including limited volume growth, mix improvement, and likely negative pricing for new cars and residuals.
Mercedes-Benz's Chief Financial Officer, Harald Wilhelm, has communicated openly about the company's challenges, promising a comprehensive update in the first quarter of 2025. The company has also confirmed a Capital Markets Day for February 19, 2025, to further address the structural issues it's facing.
Barclays' analysis, taking into account the projected EBIT margin range for the fourth quarter of 2024, has led to the conclusion that their estimates are 7% to 17% below the current Bloomberg Group EBIT consensus. This revision reflects the firm's expectations of the automaker's financial performance in the near future.
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