Will Volkswagen AG Continue The Positive Growth In 2019?

Volkswagen AG (OTCMKTS: VWAGY) declared its annual results for the fiscal year 2018 on March 12, 2019 early morning. The company posted revenues of €235 billion ($268 billion), up by around 2.5% year on year and earnings were reported at €23.6 ($27), up by around 2% year on year. We can say that the company is succeeding in delivering better results post the emission scandal which contributed a negative €3.2 billion ($3.6 billion) for the year.

We have a price estimate of $19 per share for the company, which is in line with the market price. View our interactive dashboard – Our Outlook For Volkswagen in FY 2019 – and modify the key assumptions/expectations to arrive at a price estimate of your own. In addition, here is more Consumer Discretionary data.

The global economy has recorded weaker growth in fiscal year 2018 due to geopolitical tensions, turbulence in financial markets, and protectionist tendencies. The weaker growth has affected passenger and commercial vehicles sales as well.  Volkswagen delivered 10.8 million vehicles in 2018 which is 0.9% higher than previous year. The company also launched more than 70 new models – particularly numerous new SUVs such as the Volkswagen Touareg and T-Roc, the ŠKODA Karoq, the SEAT Arona, and the Audi Q8.

The company continues to face headwinds due to changeover to the Worldwide Harmonized Light Vehicle Test Procedure (WLTP) emission standards and exchange rate effects for the segment of passenger cars. The company expects WLTP emission standards to continue to challenge the company in 2019, though on a smaller scale.  The company reported a nearly 6% increase in sales volume for Volkswagen passenger cars. Meanwhile Audi (including Lamborghini and Ducati brands) reported a decrease of 4.1% year on year.

Skoda recorded better sales revenue and volume due to cost optimization and improved price positioning, but the margins were pulled down by exchange rate and product mix.  Volkswagen further posted losses in Bentley for the first nine months, largely due to delays in the start-up of new continental GT and associated costs. Also, the company’s commercial vehicles’ profits declined by 8% for the year even when revenue and volume where higher year on year, outlining the challenges by WLTP and the unfavorable exchange rate.

Porsche brand continued its good year by recording an increase in operating profits, total revenues due to better product mix, and higher sales volume. Additionally, Volkswagen’s financial services profit climbed by 4.5% to approximately $2.8 billion in fiscal year 2018, exhibiting a higher business growth potential in this division.

Volkswagen had a good year overall despite various headwinds, like global slowdown, WLTP, emission scandal, and reported positive growth in revenue and earnings for the year.  For the Fiscal Year 2019 we can say that the company is on the right track and is expected to perform better.

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