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Investing.com -- Shares of Mercedes-Benz Group AG jumped over 6% on Wednesday after the automaker posted stronger-than-expected third-quarter results and announced the restart of a €2 billion share buyback over the next 12 months.
“MBG delivered a comfortable beat across divisions and metrics,” Jefferies said in a note.
The brokerage said the company generated €1.4 billion in free cash flow, about half from working capital, which “should fuel buy-back expectations.”
Adjusted earnings before interest and taxes were €2.1 billion on sales of €32.1 billion, giving Mercedes-Benz a 6.5% margin.
That compared with company consensus estimates of €1.78 billion in adjusted EBIT and €32.4 billion in sales for a 5.5% margin.
The Mercedes-Benz Cars division reported €23.7 billion in sales, down 7.3% from a year earlier, with wholesale volumes falling 12%.
Adjusted EBIT for the segment was €1.14 billion for a 4.8% margin, up 0.1 percentage point year over year and above consensus estimates.
Jefferies said “cost (€1.1bn better in cars) and mix made up for lower volume/price and significant fx with China contribution €175m (€313m last year).”
The brokerage noted a “heavier than expected restructuring charge at €876 million.”
After that charge, the IFRS EBIT for the cars division was €430 million, or 1.8%. Contributions from the Beijing Benz Automotive Co. joint venture in China fell to €175 million, €138 million lower than a year earlier.
Mercedes-Benz Vans recorded €4 billion in sales, down 13.2% year over year, on an 8% decline in units. Adjusted EBIT was €412 million for a 10.2% margin, compared with consensus estimates of €392 million and 9.4%.
Free cash flow reached €1.367 billion, exceeding the €787 million consensus, though down €1 billion from a year earlier. Mercedes-Benz’s measure of free cash flow conversion was 130% for Cars and 70% for Vans.
Capital expenditures were €2.4 billion, €100 million higher than a year earlier, while working capital generated €800 million in inflows. Net liquidity rose by €1.5 billion during the quarter to €32.3 billion.
Nine-month free cash flow totaled €5.6 billion, which Jefferies said “potentially leaves €1.5 billion available for buybacks assuming Q4 neutral.”
Mercedes-Benz confirmed its full-year guidance and “slightly raised cash conversion,” setting targets of 90-110% for the Cars division and 60-80% for Vans, about 10 percentage points higher than prior levels.
Jefferies maintained a “hold” rating on Mercedes-Benz with a price target of €60, a 10% premium to Tuesday’s close of €54.65.