Mercedes Shares Surge 5% on Share Buyback Despite Uncertain Future
Mercedes-Benz shares rose approximately 5% on Thursday following the announcement of a new share buyback program and better-than-expected fourth-quarter earnings. The carmaker reported earnings before interest and taxation (EBIT) of €4.33 billion ($4.7 billion) for Q4, slightly exceeding consensus forecasts. Revenues for the year increased by 2% to €153.2 billion, up from €150 billion the previous year.
Share Buyback Program and Risks Ahead
Mercedes-Benz also disclosed a share buyback program worth up to €3 billion, with the repurchased shares set to be canceled. However, the company cautioned that supply chain bottlenecks could pose a significant risk factor. Geopolitical events and trade policies, such as the Russia-Ukraine conflict and tensions between Western powers and China, contribute to an “exceptional degree of uncertainty.”
Financial Outlook and Analyst Response
Mercedes-Benz anticipates flat growth in 2024 due to rising inflation and supply chain costs. The adjusted return on sales for Mercedes-Benz Cars is predicted to decrease from 12-14% in 2023 to a range of 10-12% in 2024. Despite the absence of significant surprises in the earnings report according to analysts at Jefferies, the cash return policy signifies confidence and aligns with the brand’s premium/luxury positioning, ensuring continued growth in earnings per share (EPS).
Overcoming Macroeconomic Challenges
According to Ola Källenius, Chairman of Mercedes-Benz, the company is well-positioned to overcome various macroeconomic headwinds. Despite challenges caused by supply constraints in the second half of 2023 and continuing into Q1 of 2024, Mercedes-Benz Vans achieved an 18% year-on-year revenue increase to €20.3 billion. Adjusted EBIT surged by 59% to €3.1 billion, while unit sales reached a record 447,800 units, representing an 8% increase.
Continued Investments in Future Development
Källenius emphasized that Mercedes-Benz will not scale back its investments in future development, highlighting the company’s commitment to expanding its market presence. Although the current macroeconomic environment poses challenges, including escalating conflicts and geopolitical tensions, high interest rates, and structural economic headwinds in China, Mercedes-Benz remains dedicated to maximizing its potential in over 150 countries. The company is currently engaged in its highest level of investment in history, preparing for the launch of a new generation of products, including a significant product offensive in battery electric vehicles starting in 2025.
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