On Friday, Citi revised its price target for Mercedes-Benz (OTC:MBGAF) Group (MBG:GR) (OTC: DDAIF) shares, decreasing it from €60.00 to €56.00, while maintaining a Neutral rating on the stock. The adjustment comes in response to the automaker's recent profit warning, which prompted the firm to revise its forecasts for the company's financial performance.
The revision reflects lowered expectations for Mercedes-Benz's EBIT (Earnings Before Interest and Taxes) margins for fiscal years 2024 and 2025, now set at 7.5% and 6.6% respectively. This is due to anticipated weaker first-half results in 2025 compared to a stronger first half in 2024.
Consequently, the analyst anticipates that the company's dividend forecasts will drop below €4 and free cash flow (FCF) will fall below €6 billion per annum, indicating a potential slowdown in share buybacks.
Citi's analysis suggests that the current challenges facing Mercedes-Benz have resulted in EBIT margins that are not only below the long-term average but may not yet have reached their lowest point. Despite this, the analyst noted that there is inherent value in the stock at its current level, but this may not become apparent until the company's earnings reach their nadir.
The revised stock price target of €56.00 is based on the firm's updated expectations, which take into account the lowered EBIT margin forecasts and the anticipated decline in dividend payouts and free cash flow.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.