Is Daimler AG a Winner in the Auto Manufacturers Industry? German carmaker Daimler AG's (DDAIF) strategic partnerships to grow its commercial vehicle business and establish itself as a strong fuel cell produce...
By Imon Ghosh •
This story originally appeared on StockNews
German carmaker Daimler AG's (DDAIF) strategic partnerships to grow its commercial vehicle business and establish itself as a strong fuel cell producer have raised investors' hopes for its stock's performance. Furthermore, now that the company is accelerating its shift to electric mobility to meet its "Electric First" carbon neutrality goal, we think the stock should attract even more investor attention.
Based in Stuttgart, Germany, Daimler AG (DDAIF) is known for its world leading vehicle brands, which include Mercedes-Benz Cars & Vans, Freightliner, and Western Star. A noticeable uptick in sales of Mercedes-Benz vans in the EU30 region in the last reported quarter, coupled with its strategic joint venture with the Volvo Group to become leading fuel-cell producers, has helped the stock deliver impressive returns this year.
Shares of DDAIF have gained 22.1% year-to-date versus the First Trust NASDAQ Global Auto Index Fund's (CARZ) 16% returns.
Also, the stock has gained 109.3% over the past year and 23.4% over the past six months. As the company focuses on a sustainable business strategy to expand its electric vehicle portfolio and deliver a CO2-neutral fleet of new cars, it is well positioned to capitalize on the EV industry tailwinds.
Click here to check out our Automotive Industry Report for 2021
Here is what we think could shape DDAIF' performance in the coming months:
Solid Growth Estimates
Analysts expect DDAIF's EPS to increase 52.9% year-over-year to $3.47 in the next quarter, ending September 30, 2021. Consensus EPS estimates indicate a 201.7% increase in the current year and a 6.7% increase next year. DDAIF has an impressive earnings surprise history; it beat the Street's EPS estimates in three of the trailing four quarters.
A $52.42 billion consensus revenue estimate for the next quarter indicates a 6% improvement year-over-year. Also, its revenue is estimated to increase 12.6% in its fiscal year 2021 and 4.1% in 2022.
Strategic Collaborations
In March, DDAIF's Daimler Truck AG and Volvo Group forged a joint venture to develop a fleet of sustainable-fuel vehicles by 2050 and establish themselves as world- leading fuel-cell producers.
Furthermore, earlier this year DDAIF signed a memorandum of understanding with U.S. engine manufacturer Cummins Inc. to cooperate on medium-duty engines for commercial vehicles. Under this partnership, Cummins will invest in the production and supply of medium-duty engines for Daimler trucks and buses.
Expanding Electric Vehicle Portfolio
DDAIF's Ambition2039,"Electric First" strategy, which is aimed at accelerating its path to carbon neutrality, should significantly enrich the company's electric vehicle portfolio. It plans to expand its offerings by adding a compact electric model EQA, the EQS, EQB and EQE later this year. DDAIF plans to boost its Mercedes-Benz Vans' EV portfolio by introducing concepts for an electrified Citan and T-Class before the end of this year. Furthermore, its eActros LongHaul truck under its Daimler Trucks & Buses segment is set to hit the market in 2024.
Robust Financials
DDAIF's revenue increased 10.2% year-over-year to €41.02 billion ($49.60 billion) in the first quarter, ended March 31, 2021. This can be attributed primarily to a strong increase in unit sales in China. The company's EBIT grew 831.6% from its year-ago value to €5.75 billion ($6.95 billion). Its net profit was €4.37 billion ($5.29 billion), representing a 2,503% year-over-year increase. The company's EPS came in at €4.01 ($4.85), up significantly from the prior-year period.
DDAIF's 67.5% trailing-12-month gross profit margin is 22.4% higher than the 55.1% industry average. Its trailing-12-month EBITDA margin and asset turnover ratio of 18.5% and 0.6%, respectively, compare favorably with industry averages. Also, its $501.5 million trailing-12-month cash from operations compares favorably with the negative $13.75 million industry average.
POWR Ratings Reflect Promising Outlook
DDAIF has an overall A rating of A, which translates to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. DDAIF has a B Momentum Grade. This is consistent with the stock's price returns over the past year.
Also, in terms of Growth Grade, DDAIF has an A. The company's strong financial performance and significant growth potential are in sync with this grade. Additionally, it has a B grade for Stability.
Click here to see the additional POWR Ratings for DDAIF (Sentiment, Quality, and Value).
The stock is ranked #2 of 57 stocks in the Auto & Vehicle Manufacturers industry.
If you're looking for other top-rated stocks in the same industry, with an Overall POWR Rating of A or B, you can access them here.
Bottom Line
DDAIF's ambitious strategy to speed up the electrification of its Mercedes-Benz cars and trucks, and high hopes for its CO2 neutral transport and fuel cell partnership, make it a strong player in the auto manufacturing industry. In fact, increased demand for its vans and heavy-duty trucks should bolster its top-line growth further. Therefore, we think it could be wise to bet on the stock now.
Click here to check out our Automotive Industry Report for 2021
DDAIF shares were unchanged in premarket trading Wednesday. Year-to-date, DDAIF has gained 22.11%, versus a 17.27% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.
