“Oh Lord, won’t you buy me a Mercedes-Benz?” sang Janis Joplin, satirically. Vehicles bearing the tristar badge are unironically prized by truckers as well as by many car drivers. However, component supply shortages cast a pall over the sales of Daimler Truck, the Mercedes brandholder for heavy vehicles. These are only deepened by the war in Ukraine.
The German automakers provided a ray of sunshine this week with first-quarter results. Jochen Goetz, chief financial officer, said bottlenecks in semiconductor supply would improve in the second half, as should North American sales. High order backlogs are evidence of a “strong demand environment”. Adjusted earnings before interest and taxes rose to €651mn in the first three months, from €588mn a year before.
Ukraine is the hazard missing from that glance ahead and behind. Suspending all business activities in Russia left Daimler Truck with a modest €170mn impairment. Analysts who point out that many engine blocks are sourced from South Africa — which is less directly dependent on Russia for energy — are also substituting detail for sweep. The bigger issue is the impact of the war on the European economy.
The conflict will weigh heavily on customers for at least the year ahead. The final impact depends on military and economic developments no sensible pundit can do more than guess at.
The business is at least heading for trouble from a position of relative strength, as reflected in the recent profits performance, and with a middle scenario priced in. Daimler Truck has decent operating margins, sustainable gearing and a portfolio of strong truck brands of which Mercedes-Benz is just one.
Those merits are reflected in a forward price/earnings ratio of more than seven times — a premium to rivals Traton and Iveco, according to S&P CIQ.
The shares themselves trade in line with European industrials on a tight beta, which means they are modestly below their listing price following a partial demerger from carmaker Mercedes-Benz last year. Some sunshine on the dashboard in the quarterly results will hearten passengers. Casual hitchhikers — Joplin sang a song about those too — bailed out in February when Russian tanks rolled.
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