Daimler's robust Q1 underwhelms hopeful market

FRANKFURT Fri Apr 29, 2011 5:08am EDT

Historical and future Daimler cars are on display at a Daimler annual shareholder meeting in Berlin, April 13, 2011. REUTERS/Thomas Peter

Historical and future Daimler cars are on display at a Daimler annual shareholder meeting in Berlin, April 13, 2011.

Credit: Reuters/Thomas Peter

FRANKFURT (Reuters) - Daimler posted robust quarterly results that underwhelmed investors whose expectations had been inflated by recent stellar reports by peers such as Volkswagen (VOWG_p.DE) and truck maker Volvo (VOLVb.ST).

Shares of Daimler slid to the bottom of the German blue-chip index .GDAXI as well as the STOXX Europe 600 Automobiles & Parts .SXAP index, trading 2.1 percent lower at 51.97 euros at 0829 GMT.

Daimler's first-quarter earnings before interest and tax (EBIT) rose 71 percent to 2.03 billion euros ($3 billion), helped by strong passenger car demand from emerging markets and a robust truck business.

That was slightly above the average analyst estimate of 1.99 billion euros in a Reuters poll but not enough to move Daimler shares higher.

"While the first quarter was definitely a good quarter for Daimler, it also shows that it becomes more difficult for the company to surprise positively as expectations are high," Equinet analyst Tim Schuldt said.

Volkswagen, Europe's biggest carmaker, this week blasted through market forecasts as it reported emerging markets boosted its quarterly business.

Daimler's passenger car business also benefited from demand in China -- now the world's largest car market -- where it sold 82 percent more cars in the first three months of 2011 than in the year-earlier period.

Global luxury car makers, from Volkswagen's Audi to BMW (BMWG.DE), have racked up eye-popping sales in China, where a growing army of super-rich is fuelling demand for everything from Gucci handbags to Rolls-Royce cars.

Daimler Chief Financial Officer Bodo Uebber said on Friday he had no indication that demand in China would ease in coming months, adding he expected Daimler to grow 15-20 percent there this year, faster than the market.

Uebber warned, however, that growing headwinds from rising commodity prices could lead to higher than expected costs this year and that exchange rates would likely remain volatile.

But Daimler still affirmed its 2011 outlook, saying it expects EBIT to rise significantly this year, offering little solace for investors who had hoped for more specific guidance after being disappointed in February by the vague outlook.

"We want to keep the suspense ahead of every quarter," Uebber said.

KEEP ON TRUCKING

Daimler's trucks business was in line with consensus, but some criticized that margins there still lagged peers, with a return on sales of 6.6 percent, partly due to the impact of the earthquake and subsequent nuclear crisis in Japan.

Daimler Trucks took a 49 million euro hit from damage and production losses in Japan, where its Mitsubishi Fuso unit had to halt production for several weeks. Additional costs in the second quarter could come to 50-100 million euros, Uebber said.

Volvo and Scania SCVb.ST, two of Europe's biggest truck makers, this week posted forecast-beating operating margins of 9.1 percent and 16.1 percent, respectively, underscoring the sharp rebound in the global truck market and raising expectations for Daimler.

The highly cyclical heavy-duty truck market has picked up strongly in recent quarters, with growth spreading out of emerging markets in Asia and Latin America to more mature markets on both sides of the North Atlantic.

Bernstein analyst Max Warburton said he expects growth at Daimler Trucks to accelerate and margins to recover this year.

"We are lukewarmly enthusiastic," Silvia Quandt analyst Albrecht Denninghoff said.

"Considering the positive surprises at Volvo and VW, Daimler's figures are not enough to give its stock additional impulses."

(Additional reporting by Harro ten Wolde; Editing by Hans Peters)

($1=.6740 Euro)

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