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On Thursday, RBC Capital Markets adjusted their financial outlook on Mercedes-Benz (OTC:MBGAF) Group (MBG:GR) (OTC:DDAIF), reducing the price target from €79.00 to €73.00, while still affirming an Outperform rating on the automaker’s stock. RBC Capital’s analysis indicated potential impacts from permanent tariffs, suggesting an 8% decrease in Mercedes-Benz’s EBIT (earnings before interest and taxes).
The analyst at RBC Capital, in a recent report, stated that they anticipate a valuation contraction for Mercedes-Benz, forecasting shares could potentially drop to €62, which would nevertheless represent a 24% increase from current levels. The report also highlighted Mercedes-Benz’s capacity to engage with the Trump administration to potentially mitigate tariff impacts, such as by adjusting operations at its Tuscaloosa plant.
In response to these factors, RBC Capital has revised its earnings estimates for Mercedes-Benz to the lower end of the company’s guidance. This adjustment is accompanied by a reduction in the valuation multiple from 2.5x to 1.5x. Despite the lowered price target and earnings estimates, the analyst noted Mercedes-Benz’s robust capital return policy as a positive factor.
The report elaborated on the expected returns to shareholders, with projections indicating that approximately 13-14% of the company’s market capitalization could be distributed in 2025 through buybacks and dividends. This return policy underlines Mercedes-Benz’s commitment to shareholder value amidst the forecasted economic challenges.
The revised price target of €73, down from the previous €79, reflects the cautious yet still optimistic stance from RBC Capital, considering the current share price level of €50. The maintained Outperform rating suggests that, despite the revised financial metrics, RBC Capital continues to view Mercedes-Benz as a favorable investment relative to its peers.
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