BMW Shares Surge to Record High on 2014 Profit Forecast – Bloomberg

Bayerische Motoren Werke AG (BMW), the
world’s biggest maker of luxury autos, surged to a record high
after forecasting a significant gain in 2014 profit as models
like the 4-Series Gran Coupe and i8 sports car propel sales.

Pretax profit will rise by at least a high single-digit
percentage above 2013’s 7.91 billion euros ($11 billion), Chief
Financial Officer Friedrich Eichiner said today at the annual
press conference in Munich. Earnings will be lifted by 16 new
and refreshed models and lower development spending.

“BMW gave a surprisingly positive outlook,” said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler, who
recommends buying the shares. “They seem to be getting out of a
phase of stagnation quicker than expected.”

Competition among Germany luxury-car makers is heating up
as Volkswagen AG’s Audi division, which ranks second in the
segment on an annual basis, outsold BMW’s namesake brand in the
first two months of 2014. Daimler AG’s Mercedes-Benz, which
holds third place, has boosted deliveries faster than the two
larger rivals in recent months. BMW said today that sales gains
should be stronger in the second half.

“We will remain the world’s leading premium car company”
this year, Chief Executive Officer Norbert Reithofer said today
at a press conference at BMW’s headquarters in Munich. “We
remain very confident about the business year 2014,” with sales
volumes set for a “significant increase.”

Record High

The shares advanced as much as 6.44 euros, or 8 percent, to
87.16 euros, the highest price on record for the company first
listed in 1926, and was up 7.1 percent as of 1:43 p.m. in
Frankfurt. The stock has climbed 25 percent over the past 12
months, valuing the automaker at 55.5 billion euros.

BMW will rein in spending on research and development after
investing 4.8 billion euros in 2013, the equivalent of about 6.3
percent of revenue last year. Development outlays this year
should “move toward” the company’s target range of 5 percent
to 5.5 percent, Eichiner said.

BMW has ramped up spending in recent years to fend off Audi
and Mercedes, which both plan to take the luxury-sales crown by
the end of the decade. The three German manufacturers are also
facing a challenge from expansion by smaller producers of
upscale vehicles, including Tata Motors Ltd. (TTMT)’s Jaguar Land Rover
and Fiat SpA (F)’s Maserati. BMW may announce plans as soon as next
week to expand its U.S. factory, production chief Harald Krueger
said today.

Competitors Offerings

“The continuous investment in innovations ensures our
long-term success,” Reithofer said. When the company turns 100
years old in 2016, “we will not be looking in the rear-view
mirror but focusing on the road ahead.”

Audi, which has never held the top luxury-car sales post
for an entire year, will introduce 17 new or revamped vehicles
in 2014, including a remake of the iconic TT sports car.
Stuttgart-based Mercedes is rolling out 30 autos by the end of
the decade, including a dozen all-new cars.

BMW is responding with the upgraded X5 sport-utility
vehicle introduced in November and the revamped X3 SUV, 2-Series
Active Tourer hatchback and i8 plug-in hybrid sports car coming
out this year. The Munich-based automaker said it already has a
six-month order backlog for the i8.

BMW, which also owns the Mini and Rolls-Royce brands, is
forecasting
that group sales will exceed 2 million autos for the
first time in 2014, achieving the target two years earlier than
planned.

Retaining Title

IHS Automotive estimates the BMW nameplate will sell 1.77
million cars this year, beating 1.66 million deliveries at
Ingolstadt-based Audi and 1.56 million at Mercedes. That would
make BMW the best-selling luxury marque globally for the 10th
straight year.

Fourth-quarter earnings before interest and taxes rose 4.2
percent from a year earlier to 1.95 billion euros. Automotive
earnings narrowed to 9.2 percent of sales from 10.6 percent in
the 2012 period.

The full-year margin from carmaking in 2013 was 9.4
percent, compared with 10.1 percent at Audi and 6.2 percent at
Mercedes. BMW expects the margin this year to be between 8
percent and 10 percent.

Group deliveries gained 6.4 percent last year because of a
23 percent jump for the best-selling 3-Series line to more than
500,000 autos. The model faces stiffer competition this year
with Mercedes upgrading the C-Class.

To contact the reporter on this story:
Christoph Rauwald in Frankfurt at
crauwald@bloomberg.net

To contact the editor responsible for this story:
Chad Thomas at
cthomas16@bloomberg.net

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