Mercedes shares up 5% thanks to buyback, despite “exceptional” uncertainty ahead

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Mercedes-Benz shares gained about 5% on Thursday after the German automaker beat fourth-quarter profit expectations and announced a new percentage buyback program, despite caution about “exceptional” dangers for next year.

Fourth-quarter earnings before interest and taxes (EBIT) came in at 4. 33 billion euros ($4. 7 billion), above consensus expectations, bringing the full-year figure to 19. 66 billion euros. Revenue rose 2% in 2023 to €153. 2 billion from €150 billion last year.

The organization also announced a new percentage buyback program of up to €3 billion, canceling the buyback percentages.

However, Mercedes-Benz warned that bottlenecks in the supply chain of critical parts remain a “major threat factor,” saying that an “exceptional degree of uncertainty” surrounds geopolitical developments and industrial policy, in the form of conflicts between Russia and Ukraine and in the Middle East. and tensions between the Western powers and China.

The company expects stable growth in 2024 as inflation and origin chain costs begin to rise, while the adjusted return on Mercedes-Benz car sales is expected to fall to a 10-12% variance from 12-14% in 2023.

Auto analysts at Jefferies said in a reactive note on Thursday that while there were no surprises in primary earnings, the cash-back policy is “a sign of confidence and consistent with premium/luxury positioning, with a planned buyback to maintain EPS (earnings consistent with participation). growing. “

Mercedes-Benz President Ola Källenius told CNBC on Thursday that the company is well-positioned to weather macroeconomic headwinds.

“Today we present very strong figures for Mercedes-Benz Cars and, indeed, an exceptional year for our commercial van division,” he said.

Mercedes-Benz Vans sales increased 18% year-on-year to €20. 3 billion and adjusted EBIT increased 59% to €3. 1 billion, while unit sales rose 8% to a record 447,800 units.

Still, Källenius noted that supply constraints had an effect on the company in the second half of 2023 and will continue to do so in the first quarter of 2024.

“But we’re executing it with our partner, now we’re putting in more capacity that’s been ready over the last few months, so in this first quarter and towards the end, I think we’ll have solved those issues, so at this point in the quarter we’re going to go back to a more general home situation,” he added.

While acknowledging that the macroeconomic environment is “challenging” amid growing conflicts and geopolitical tensions, as well as persistently high interest rates and structural economic headwinds in China, Källenius said Mercedes will not invest in long-term development.

“That doesn’t mean we’re pulling out of any specific market, but rather we’re looking to exploit the full potential for ourselves in the more than 150 countries in which we’re active,” he told CNBC’s Annette Weisbach, adding that the company is rarely “scaling back” its investments much.

“In fact, we’ve been at the highest point of investment in the company’s history lately, preparing a whole new generation of products, some of which will be introduced this year, but it’s a product offensive, especially on the battery electric vehicle side. “It starts in 2025, continues until 2026 and beyond,” Källenius said.

“That’s why we’re fully advanced in terms of the emergence of new technologies, inventions and a wide range of products for the coming years. “

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