On Friday, Morgan Stanley (NYSE:MS) maintained its Overweight rating on Mercedes-Benz (OTC:MBGAF) Group (MBG:GR) (OTC: DDAIF) stock with a steady price target of EUR82.00, even as the automaker revised its financial outlook downward for the fiscal year 2024.
Mercedes-Benz Group now anticipates a Return on Sales (RoS) of 7.5-8.5% for its Cars division, a decrease from the previously projected range of 10-11%. This adjustment suggests a margin of around 6% for the second half of 2024.
The company's expectations for its Vans and Mobility divisions remain unchanged, with Vans aiming for a 14-15% RoS and Mobility targeting an 8.5-9.5% Return on Equity (RoE).
Despite these stable projections, the overall earnings before interest and taxes (EBIT) for Mercedes-Benz Group are forecasted to be "significantly below" the prior year's results, indicating a year-over-year decline of more than 15%, as opposed to the earlier estimate of a "slightly below" outcome.
The anticipated industrial free cash flow (FCF) is also set to fall "significantly below" the level achieved in the previous year, which implies a year-over-year decrease of over 25%. These revised projections could lead to a roughly 20% reduction in consensus group EBIT estimates. The consensus view had previously expected a fiscal year 2024 Cars EBIT margin of 10.1%.
With revenues projected to stay the same, the new guidance could mean a roughly 20% decrease in consensus Cars EBIT and about a 15% reduction for the group as a whole. However, the impact on the group's EBIT could reach around 20% when considering factors such as a weaker product mix and ongoing "dynamic pricing."
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