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Investing.com -- Mercedes-Benz Group AG (ETR:MBGn) struck a cautious tone regarding its cars division during its second-quarter pre-close call, sending its shares down on Tuesday.
The German luxury automaker flagged weaker profitability expectations and persistent challenges in wholesale volumes and pricing.
The Stuttgart-based company reported that wholesale volumes for the cars division in the second quarter were only flat quarter-on-quarter, despite a soft first quarter.
The lack of sequential growth was compounded by a stagnant product mix, with top-end vehicles making up just 14% of the share.
Mercedes-Benz now expects full-year 2025 EBIT margins for the cars division, before tariffs, to come in at the lower end of the 6-8% guidance range.
Tariff-related impacts were estimated at under 300 basis points. The outlook for free cash flow also deteriorated, with Q2 industrial FCF forecast at €1.3 billion, down substantially from the strong first quarter. Total (EPA:TTEF) FCF for the first half is estimated at €3.6 billion.
Vans, another key segment for Mercedes-Benz, are also under pressure. The company now sees Q2 margins for Vans at the lower end of its full-year guidance, citing fierce pricing competition.
In response to the call, UBS analysts revised down their FY25 EBIT estimate for the cars division to €1.2 billion, reflecting a 4.9% margin.
The reduced outlook implies a downgrade of 5–10% to earnings per share expectations for the full year.
Analysts said the cautious messaging points to “high single digit” percentage cuts to both EBIT and EPS forecasts.
They also warned that the company’s share buyback activity is likely to remain muted in the near term due to the weaker cash generation profile, limiting potential support for the stock price.
While broader investor concerns might lead to negative sentiment across the sector, UBS suggested that any read-across to BMW (ETR:BMWG) could be limited.
They expect BMW to hold its ground with an auto EBIT margin near 5% in Q2, possibly reaffirming full-year guidance even with tariff assumptions built in.