Daimler (DDAIF) posted a 10% increase in third-quarter earnings, beating analyst estimates but failing to impress investors who sent shares in the automaker sharply lower after it warned of a slump in truck sales.
The Mercedes-Benz maker's stock fell by around 2.5% Friday in Frankfurt to €64.34 per share, reversing gains made on Thursday in expectation of strong third-quarter results.
Germany's No. 2 car maker posted third-quarter earnings of €4 billion ($4.35 billion), ahead of analyst expectations of about €3.8 billion, on strong demand for its Mercedes-Benz sports utility vehicles and the newly re-launched E-Class sedan. Group net profit came in at €2.6 billion, up 8.8% from the €2.39 billion profit in the same period last year.
Mercedes-Benz, Daimler's biggest unit, posted a 12% increase in the sales to €23.3 billion, including a 12% increase in Europe and a record 20% increase in China, pitting it on course to leapfrog rival BMW (BMWYY) to become Germany's biggest car brand by volume for the first time in a decade. Earnings at the unit rose 23% to €2.75 billion.
"We have proven one more time that we are pursuing the right strategy," Daimler's Chairman and head of Mercedes-Benz Dieter Zetsche said in a statement.
The car unit's burgeoning results were offset by a downturn in Daimler Trucks, which posted an 18% decline in revenue as demand plunged in key markets including North America, down almost 40% year-on-year to 31,400 units, and Brazil, down 18.6% to 3,500 units. Earnings at the unit fell to €464 million, down 40%, due to both lower volumes and declining margins fueled by increased competition.
The truck unit's poor performance was mirrored by competitor Volvo (VOLVY) , which on Friday posted a 15% decline in third quarter net profit as total sales declined 6%, dragged lower by a 13% decrease in truck sales that account for about two-thirds of its total revenue. Volvo shares traded down just under 1% on Friday.
Daimler warned that demand for trucks in North America will continue to decline and is likely to be 15% lower in 2016, while Brazilian demand is likely to fall by a total 25%.
Daimler said that the fourth quarter was likely to deliver "moderate expansion" and was equivocal on its full-year guidance, noting that it expected a small increase in revenues and total unit sales for 2016 "in the magnitude of the previous year." The group said earnings "will increase slightly in 2016" compared to last year's figure of €13.8 billion.