Mercedes-Benz: Q1 results beat expectations, but challenges remain

Mercedes-Benz Group AG (MBG.DE) reported its first-quarter results, which exceeded analysts’ consensus estimates. The Cars division reported adjusted EBIT of €933 million, a 47% year-over-year decline, but significantly exceeding the market consensus estimate of €751 million. Citi described these results as an “extraordinary positive surprise,” though it noted that market expectations were set low.

Selected company results and a comparison with the average forecasts of the analysts surveyed. Source: Bloomberg Financial LP

The Cars segment’s operating margin stood at 4.1%, compared with 7.3% a year earlier, but even here analysts had expected worse, forecasting just 3.17%. The Vans segment also surprised on the upside, with EBIT of €415 million against a forecast of €382 million. Source: Bloomberg Financial LP The company confirms its full-year forecast, which projects an EBIT margin for the Cars segment in the range of 3% to 5%; given that Q1 results fell near the midpoint of this range, this target appears achievable. Free cash flow for the industrial segment amounted to EUR 1.86 billion, and after adjustments, as much as EUR 2.8 billion, with a significant contributing factor being a positive change in working capital of EUR 2.7 billion, which may partially reverse in subsequent quarters.

The industrial segment’s net liquidity remains at a solid level of EUR 33.8 billion, providing a safety buffer in an uncertain macroeconomic environment. However, the challenges remain significant. Sales in China, still Mercedes-Benz’s largest market, fell by 27% year-over-year, and management expects conditions in the region to remain difficult due to the real estate crisis, high youth unemployment, and a general reluctance among consumers to make purchases. The average selling price per model fell by 7.7% to €66,700. Additional burdens include U.S. tariffs, which cost the company $1.2 billion last year, as well as rising raw material prices, which may accelerate in the second half of the year.

The company is reducing its global production capacity by more than 10% to approximately 2.2 million units, although in Germany, where nearly half of its production takes place, labor agreements protect jobs through 2035. Hopes for an improvement in the second half of the year rest on a wave of new model launches, including the refreshed S-Class and the electric version of the best-selling GLC. In total, Mercedes plans to introduce about 40 new models in the coming years, which is expected to boost both sales volume and margins. At the same time, the higher share of electric vehicles in the sales mix continues to dilute profitability.

The company’s shares rose by up to 3% in response to the results, but this move was quickly reversed. The price is hovering around EUR 48.67, well below the key moving averages EMA50 (53.49), EMA100 (54.86), and EMA200 (55.38), and the RSI at 28.2 technically signals that the company’s shares are

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