Daimler AG (DDAIY) led European auto stocks higher Wednesday amid speculation that the Mercedes maker is planning a change in its corporate structure that could lead to the separation of its €31 billion ($37 billion) truck and bus unit.
Daimler shares were marked 2.8% higher in the opening 90 minutes of trading in Frankfurt and changing hands at €63.95 each, the highest since July 19, after Goldman Sachs analysts upgraded the German automaker to "Buy" with 12-month price target of €81.00. The move lifted rival automakers BMW AG and Volkswagen AG, the world's second-biggest carmaker, to the top of the DAX performance index leaderboard and boost share prices for French carmakers Renault SA and Peugeot SA 2.1% and 1.3% higher respectively.
Goldman Sachs analysts wrote in a Wednesday client note that Daimler's reference to a company structure review in its second quarter earnings, as well as a recent report from the German business weekly Manager Magazin, "suggested that Daimler is considering moving towards a holding structure, which we believe would mark the beginning of a roadmap for structural value creation."
"On our estimates the move towards a holding company structure and potential listing of its Truck and Bus division could trigger the release of significant shareholder value," Goldman wrote.
Manager Magzin's August 24 report said the Stuttgart-based carmaker could create three separate legal entities -- Mercedes & Vans, Trucks and busses and financial services -- as it realigns its structure in the global push towards clean energy and self-driving vehicles.
"In our view, such a holding company structure would give Daimler increased strategic freedom to develop strategies for each of its businesses to meet significant structural challenges over the next decade," Goldman said. "Mercedes and Vans need to position itself for transition to electrification, autonomous car and mobility as a service."
Daimler's shares have notably under-performed the Stoxx Europe 600 Automobiles & Parts index so far this year, falling 9.5% compared to the benchmark's 6.5% gain and a 5.4% advance for the DAX performance index.
Daimler's second quarter earnings, published on July 26, were weaker-than-expected, but the group notched record sales for its luxury Mercedes-Benz division thanks in part to surging sales in China.
Daimler said operating profit for the three months ending in June came in at €3.74 billion, modestly lower than the €3.8 billion street forecast but 15% higher than the same period last year. Group revenues grew 7% to €41.158 billion, Daimler said, with sales in China rising 18% to a record €4.652 billion.
Mercedes-Benz sales hit a record 595,200 over the quarter, Daimler said, while unit sales in China rose 28%. Daimler said it expects to see a "normalization of demand" this year in the world's biggest car market "but the market is likely to expand significantly in the full year compared with 2016."
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