Morningstar | BMWYY Updated Forecasts and Estimates from 27 Aug 2018
Narrow-moat-rated BMW reported record second-quarter earnings per share before special items of EUR 3.14, in line with sell-side consensus of EUR 3.14 but EUR 0.20 per share lower than a year ago. Group revenue declined 3% compared with the prior year to EUR 25.0 billion on automotive unit volume that declined 1% versus the second quarter of 2017. Excluding unfavorable currency exchange rates, revenue growth would have been nearly flat at 0.1%. Headwinds--including new, more costly European emission certification procedures, higher research and development spending, increased investment in electrification and autonomous technologies, and unfavorable currency translation--resulted in a 40-basis-point year-over-year contraction in group EBT margin to 11.5%.BMW does not provide numbers, but management confirmed guidance that automobile and motorcycle sales would reach new records in 2018 on "slight" increases in units and revenue. Despite the second-quarter headwinds, BMW's margin performance was at the high end of guidance. However, we estimate margin contraction caused by higher spending for Europe emission certification, electrification, and autonomous technologies, plus U.S. and Europe plateau demand, and lower imported China volume partially offset by increased joint venture unit volume, resulting in our estimated profitability at the low end of management’s long-term 8%-10% EBIT margin guidance through our Stage I forecast.
Even though BMW appears to be on track to exceed our expectations, our fair value estimate represents 23% upside potential from the current consensus price target. We think BMW's stock has been overly discounted on concerns regarding an escalation in tariffs, the diesel antitrust investigation, the U.S. demand cycle, and a shift to lower-priced, locally produced vehicles in the Chinese market. This 4-star-rated stock currently trades at a compelling 31% discount to our EUR 117 fair value estimate.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.