Daimler share price up, projects future growth on Mercedes

Daimler AG projected higher demand for its Mercedes brand in China, that would boost earnings in 2015, as the carmaker reported its fourth quarter results.

Chief Executive Dieter Zetsche said Daimlers operating profit will jump at least 10% in 2015, boosted by more than 5% increase in sales.

During recent years the company has struggled to compete against fellow German carmakers Audi and BMW, but robust demand for the Mercedes brand, the S-class sedan in particular, in China has helped Daimler draw closer to its rivals.

Daimler would continue the trend to introduce new or refurbished vehicles in 2015, outlining efforts in line with its determination to regain the crown in the luxury vehicle market by 2020. Mercedes is set to launch four sport-utility models this year alongside a new Pullman sedan.

Daimler proposed to lift its dividend from €2.25 to €2.45 per a share, mirroring analysts projections. The company also announced a plan to boost its dividend to around 40% of net profit in the future, the proposed payment represents 37.6% of current earnings.

Operating profit for the fourth quarter stood at €2.82 billion, up compared to the €2.56 billion a year ago. However, due to €600-million charge related to Daimlers truck unit, net income fell 33% to €1.10 billion. In comparison analysts surveyed by Reuters had projected an operating profit of €2.42 billion.

In 2014 Daimler sold more than 2.5 million vehicles, a record for the company, including a 10% increase in Mercedes-Benz sales to 1.72 million vehicles. Margin for the luxury brand climbed from 6.5% to 8.1%, with projection to hit 10% in the mid-term.

The companys truck sales climbed 2% during the twelve months to December, but are projected to grow further in 2015 and result in more than 10% increase in operating profit for the division.

Net profit for the past year was €7.3 billion, or €6.51 per share, compared to per-share earnings of €6.40 in 2013.

During 2014 Daimler exercised the option to sell its stake in Rolls Royces engine unit, which reflected in a €2.4 billion cash inflow. Additionally, the company sold its around 4% share in electric carmaker Tesla, which brought Daimler €625 million.

“In 2014, we once again set records for unit sales, revenue and earnings, and these accomplishments too were the result of hard work,” said Mr. Zetsche.

Daimler gained 0.58% on Wednesday and closed at €82.63 in Frankfurt. On Thursday the stock edged up 0.44% to €82.99 at 13:07 GMT, marking a one-year increase of 37.75%. The company is valued at €88.40 billion.

According to the Financial Times, the 27 analysts offering 12 month-price targets for Daimler have a median target of €82.00, with a high estimate of €92.00 and a low estimate of €61.00. The median estimate represents a 0.76% decrease from the last closing price.