German automobile giant Mercedes-Benz Group AG (DE:MBG) downgraded its margin outlook for 2024, citing difficult trading conditions in China and supply chain issues. Mercedes now expects an annual adjusted return on sales (RoS) in the range of 10% to 11% for its Cars division, revising its earlier projection of a margin between 10% and 12%.
On the other hand, the luxury car maker increased its adjusted RoS guidance for its Vans division to the range of 14% to 15% from the previous outlook of 12% to 14%. This upgrade was mainly driven by ongoing strong net pricing and significant cost reductions. MBG stock gained 0.13% as of writing.
Mercedes’ Q2 Results
In the second quarter, Mercedes’ revenue fell by 3.9% year-over-year to €36.7 billion. Among the company’s segments, Mercedes-Benz Cars witnessed a 25.1% decline in sales units for BEVs (battery electric vehicles). Moving forward, the company expects an increase in plug-in hybrid sales in the second half of 2024, as Europe and the U.S. experience growing demand for hybrid models amid a slowdown in EV sales.
Meanwhile, Mercedes EBIT (earnings before interest and taxes) dropped by 19.1% year-over-year to €4.04 billion in Q2. The company’s net profit decreased to €3.06 billion from €3.64 billion in the same quarter last year.
Analysts’ Reactions
After the Q2 results, MBG stock received three Buy ratings from analysts. RBC’s Tom Narayan forecasts a 42.3% increase in share price, while J.P. Morgan’s Jose Asumendi expects a 23% upside. UBS analyst Patrick Hummel anticipates an upside potential of 34.4%.
Meanwhile, analysts from Bernstein stated that investors had anticipated a profit warning, and the company’s decision to only adjust its margin forecast is likely to be seen as favourable.
Is Mercedes-Benz a Good Stock to Buy Now?
According to TipRanks’ consensus, MBG stock has received a Moderate Buy rating based on recommendations from 17 analysts. This includes 12 Buys, four Holds, and one Sell recommendation. The Mercedes share price forecast is €83.90, which is 33% higher than the current price level.
