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Mercedes-Benz Shares Fall After Slashing Full-Year Profit Margin Guidance
Shares of Mercedes-Benz Group AG (MBGn.DE) fell sharply after the automaker issued a profit warning, slashing its full-year margin guidance due to a difficult sales environment in China and expectations of higher costs in the fourth quarter.
Guidance Cut on China, Cost Pressures
Mercedes-Benz announced in an ad-hoc release that it was lowering its profitability forecast for its core passenger car business. The company's new guidance targets an adjusted return on sales of 2% to 3%, a significant reduction from its previous range of 3% to 5%.
Additionally, the company stated that its full-year Group earnings before interest and taxes (EBIT) are now expected to be only at the prior-year level, walking back a previous forecast for a meaningful increase. The automaker attributed the revision to a persistently challenging market in China and elevated material costs anticipated in the final quarter.
Mixed Preliminary Q3 Results
The profit warning overshadowed a mixed set of preliminary third-quarter results. While Group EBIT of approximately €1.77 billion came in ahead of the analyst consensus of roughly €1.60 billion, other figures raised investor concerns.
AdIndustrial free cash flow was a notable weak point, landing at around €172 million, well below market expectations of approximately €422 million. This miss amplified concerns about the company's ability to generate cash amid slowing sales. The guidance cut comes after the company reported a 31% year-over-year drop in Q3 passenger-car deliveries in China and a 6% decline in global unit sales.
Market Reaction
In response to the news, Mercedes-Benz stock fell 4.1% to trade at €39.69, approaching its 52-week low. The decline significantly outpaced Germany's benchmark DAX index, which traded only slightly lower, indicating the sell-off was driven by company-specific factors.
Shares of rival German automaker BMW also declined, reflecting shared sector-wide exposure to weakening demand in China. However, Mercedes-Benz bore the brunt of the negative sentiment, as investors repriced the stock to account for its lowered earnings outlook and cash flow challenges.
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