* VW brand Q3 oper margin 2.67 pct vs Rtrs poll of 2.02 pct
* Audi brand Q3 oper margin 11.15 pct vs poll of 7.80 pct
* Share of profit from Chinese JVs in Q3 was 513 mln eur
* Volkswagen pref shares ease 0.6 pct vs flat DAX .GDAXI
(Adds comments from analysts)
By Christiaan Hetzner
FRANKFURT, Oct 27 (Reuters) - Fat margins at luxury carmaker Audi drove Volkswagen's VOWG_p.DE bumper third-quarter profits and look set to prompt a series of forecast upgrades from analysts covering Europe's largest carmaker.
VW results showed Audi’s operating margin exceeded 11 percent in what is usually a weak third quarter, widening from 9.2 percent in the second quarter, which is typically Volkswagen’s strongest.
“The question is, can Audi sustain this margin?” said one German analyst, who had contributed to a Reuters poll that on average forecast Audi’s margin at 7.8 percent. [ID:nLDE69L0Q8]
By comparison, rival Mercedes-Benz DAIGn.DE only expects earnings before interest and tax (EBIT) as a percentage of revenue to reach double digits in the second half of 2012, while BMW BMWG.DE aims for just an 8 percent annual operating margin at its auto business in two years' time.
Analysts said the strong results and high quality of earnings would likely prompt an upgrade to market consensus for VW’s forward earnings, giving the stock further room to climb.
“Encouragingly, our initial review of the detailed third-quarter results suggests that there were no nasty surprises, and indeed the Audi third-quarter EBIT margin of 11.2 percent is very impressive,” said WestLB analyst Adam Hull.
“It is quite possible that over the next six months consensus could move towards a 2011 EBIT forecast of circa 7.5-8 billion euros,” he continued, adding that his own estimate of 6.8 billion was already the highest in the market.
EARNINGS HAVE QUALITY
On Friday, Volkswagen had already posted preliminary figures that beat all analysts’ forecasts, but it warned that business in the current quarter could not keep up with the blistering pace seen in the first nine months. [ID:nLDE69L1KA]
The detailed results reinforced analysts’ impression of a robust quarter.
“The quality of the earnings was solid. There was no massive increase in ‘other operating result’ as there has been in the past from time to time, and the capitalised R&D ratio of 28.2 percent over the entire nine months was okay,” said the German analyst, who asked not to be identified.
Below the operating profit level, Volkswagen also benefited from very strong earnings in China, where its share of profits from two joint ventures more than doubled to 513 million euros ($716 million) in the third quarter.
“We are well-positioned to achieve the goals laid down in our Strategy 2018,” Chief Executive Martin Winterkorn said in a statement on Wednesday. [ID:nWEA4752] (Editing by Will Waterman) ($1=.7166 Euro)