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Morgan Stanley remains Equal-Weight on Mercedes-Benz, expects small drop following 3Q report

EditorHari Govind
Published 26/10/2023, 13:48
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Morgan Stanley remains Equal-Weight on Mercedes-Benz Group (ETR:MBGn), expects small drop following 3Q report

Morgan Stanley reiterated an Equal-Weight rating on Mercedes-Benz with a 12-month price target of €73.50 ahead of the German luxury automaker’s 3Q earnings release.

Analysts at Morgan Stanley expect shares of the company will see a small negative market reaction after the automaker reported a decline in profit and revenue due to challenges from electrical vehicle competition to supply chains.

The company said it had faced a “subdued market environment marked by intense price competition,” particularly in EVs.

Mercedes-Benz's guidance remains the same, with the goal to achieve revenue and EBIT similar to last year. However, management expects the Free Cash Flow of the industrial business to be slightly higher than last year.

EBIT declined by 7% in the quarter to €4.8 billion ($5.06B). Revenue also saw a 1.4% decrease to €37.2B, falling short of the consensus estimate. The decline in passenger car sales, attributed partly to supply chain difficulties, contributed to this downturn, with a 5% drop in sales.

“Management commentary appears to be cautious,” write analysts at Morgan Stanley.

“Analysts would focus on the fairly cautious forward-looking commentary on BEV pricing and the economy, the fact MBG cars margin is seen in the bottom half of the 12%-14% guidance range now and the small decline in ASPs in the quarter.” They added in a note.

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