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Daimler earnings up 16%
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April 28, 1999: 8:47 a.m. ET
Share net is just below consensus; company expects to meet '99 sales goal
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LONDON (CNNfn) - DaimlerChrysler first-quarter operating earnings jumped 16 percent Wednesday on the back of strong auto sales and advances made by Airbus Industrie in its battle with Boeing in the global aircraft market.
But the earnings of $1.74 a share were slightly below the $1.76 a share consensus of analysts surveyed by CNNfn.com, and investors pushed DaimlerChrysler (DCX) shares down 2.4 percent to 93.10 euros in Frankfurt after the announcement.
In New York, the shares were off 1-5/16 at 100 in morning trading.
The company earned $1.50 a share on a pro forma basis in the year-earlier period; Daimler-Benz and Chrysler merged last December.
Operating profit at the auto and aerospace giant climbed to 2.8 billion euros ($2.96 billion). Revenue climbed to 34.99 billion euros from 31.862 billion in the same period last year.
DaimlerChrysler co-chairman Juergen Schrempp said the company was on track to beat its full-year sales target of 137 billion euros, and that operating profit will rise faster than sales.
Analysts said the company is on track for estimated annual cost savings of $1.4 billion from its merger. They said sales should continue to benefit from the unexpected resilience of the North American vehicle market.
The results were in contrast to Wednesday's results from Volkswagen (VOWG), which saw its stock price plummet by more than 7 percent after an unexpectedly poor rise in sales and earnings
The strong performance of the DaimlerChrysler's auto unit powered the first quarter. "European car sales went absolutely bananas in 1998, breaking all previous records, and German companies are still relying on order books built up last year," said Peter Schmidt at consultant Automotive Industry Data.
Schmidt said orders in Germany had started to slow, but sales in other countries were being boosted by the weakness of the euro.
He also said the Chrysler unit continued to make gains. "The United States is a money-printing machine," Schmidt said.
Operating profit at Mercedes-Benz climbed to 531 million euros from 513 million, while Chrysler's profit jumped almost 8 percent to 1.456 billion euros.
The strong performance of Airbus Industrie, in which DaimlerChrysler's DASA unit has a 38 percent stake, reflected the advance of the European consortium in its battle with Boeing (BA).
Both manufacturers were hurt last year by a price war as Airbus closed its market share gap with Boeing. But a string of new orders and an easing in the discount battle have improved results at Airbus, which posted an operating loss last year.
DASA profit doubled in the first quarter to 93 million euros, up from 43 million euros.
DASA continues to make money from its Airbus investment through its supply contracts. The consortium this week gave the formal go-ahead to launch its new 100-seat A318 jet, which will enter the fastest-growing part of the aircraft market. The new jet will be built at DASA's Hamburg facility, boosting DASA's share of Airbus contracts.
Backstabbing
A cloud on the horizon remains the pace of integration of the two companies following their merger. While the company insists the merger process is working well, analysts said it had been plagued by predictable problems. "Everyone is putting a brave face, but things are not what they seem and there is the normal backstabbing," said Schmidt.
The company also faces an investigation by the European Commission into alleged price-fixing by parts of its distribution network which could, if proven, result in a heavy fine.
The company is scheduled to hold its annual shareholder meeting on May 23.
In New York, DaimlerChrysler shares closed Tuesday at 101-5/16, up 1-5/16.
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