Will Cost Headwinds Continue To Affect Daimler AG’s Results in Q1 2019?

Daimler AG (OTCMKTS: DDAIF), the German auto giant engaged in the development, production, and distribution of cars, vans, trucks and buses is set to announce its Q1 2019 results on April 26, 2019, followed by a conference call with analysts. The market expects the company to report revenue close to $43.76 billion in Q1 2019, which would be an decrease of 6% on a quarter-on-quarter basis. The decrease is mainly expected due to the global auto market slowdown and pricing. Market expectation is for the company to report earnings of $1.87 per share in Q1 2019, lower than $2.70 per share in the year-ago period as the company is expected to start its path to recovery.

We have summarized our key expectations from the earnings announcement in our interactive dashboard – What Has Driven Daimler AG’s Revenues & Expenses Over Recent Quarters, And What Can We Expect For Full-Year 2019?  In addition, here is more Consumer Discretionary data.

Key Factors That May Impact Future Performance:

Global Auto Market:

• The Global Auto market and hence production has been slow in the recent past. In the fourth quarter of  2018, global vehicle production was down 5% compared to last year, with China down 15% and the industry is expected to face these challenges in 2019, too. The slowdown along with cost headwinds saw a fall of more than $4 billion in Net Income for the company as it recorded $8.26 billion as Net income in 2018.

Pricing:

• Pricing has been a key reason for the fall of revenue for the company in the previous year. The company recorded better sales volume in all 4 segments i.e. Mercedes-Benz Cars, Mercedes-Benz Vans, Daimler Trucks, and Daimler Buses. Though the pricing of all segments had dropped significantly, resulting in a fall of total revenue in all segments except Daimler Trucks. In 2019 we expect pricing to have a moderate increase along with the continuous good growth in volume.

Margins and Cost Headwinds:

• Cost Headwinds like Expenditure for new technologies and future products, foreign exchange rates, Governmental proceedings, measures relating to diesel vehicles, product mix, and Inflation-related, accompanied with Margin reduction, brought down the Net Income by 34% in 2018. In 2019 we estimate headwinds to reduce slightly and margins to improve a bit as Daimler AG focuses on cost and process optimization.

Trefis has an estimate of $73 for Daimler AG’s stock. Expectations of better pricing and margins are expected to improve profitability and, in turn, work as a tailwind for the company’s stock price.

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