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Daimler Truck beats Q3 EBIT forecasts, DTNA margins remain under pressure

Published 07/11/2024, 08:16
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Investing.com -- Daimler (ETR:MBGn) Truck (ETR:DTGGe) reported a solid set of third-quarter results, with adjusted EBIT coming in ahead of market expectations, driven by standout performances from Mercedes-Benz (OTC:MBGAF), Trucks Asia, and Buses. 

However, lingering concerns over margins at Daimler Trucks North America persist as the company faces ongoing headwinds that could pressure fourth-quarter results.

DTG’s industrial adjusted EBIT of €1.15 billion, representing a 9.3% margin, was about 5.6% higher than Visible Alpha (VA) consensus. 

The group's industrial revenue was €12.31 billion, in line with market forecasts. 

The company confirmed its full-year guidance, but a cautious tone around DTNA's profitability tempered the otherwise strong results.

It was a great quarter for Mercedes-Benz, one of this quarter's most closely watched segments. 

The division recorded revenues of €4.4 billion, about 4.7% ahead of VA consensus. Adjusted EBIT came in at €283 million, translating to a 6.4% margin, surpassing expectations. 

Margins above 6% had been a critical benchmark for investors amid concerns over profitability, and Mercedes-Benz managed to clear that hurdle comfortably.

Additionally, the research and development capitalization at Mercedes-Benz rose sharply, reaching 32% in Q3 compared to roughly 11% in the same period last year. 

While this boost aided margins, it also underscores a potential shift in cost structures that will need to be monitored in future quarters.

DTNA, a big chunk of Daimler Truck's business, had a good and bad mix. The division's revenue was in line with expectations, but adjusted EBIT missed consensus by approximately 6%. 

The 12.1% margin fell short of the anticipated 12.7%, with a weaker product mix playing a key role. 

A shift toward medium-duty and vocational vehicles, as opposed to more profitable heavy-duty and on-highway models, weighed on margins.

“Going into 4Q24, the mix is likely to remain a headwind and DTG highlights significant impacts from Hurricane Helene at its Carolina operations,” said analysts at Stifel in a note.

This raises the possibility of negative revisions to DTNA’s Q4 margin forecast, currently pegged at 12.3%.

DTG reported orders totaling 94,709 units, slightly below the VA consensus of 95,569. Meanwhile, industrial free cash flow came in at negative €41 million, falling short of the expected €118 million. 

The company attributed the shortfall to higher working capital requirements, driven by supply chain constraints at Japanese body-builders and elevated inventory levels.

Despite the cash flow miss, DTG reaffirmed its full-year FCF guidance, projecting industrial FCF at similar levels to last year.

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