Morningstar | Daimler Lowers 2019 Guidance on Diesel Provision; Maintaining EUR 85 FVE
No-moat-rated Daimler, the maker of Mercedes-Benz cars, trucks (Freightliner in the United States), vans, and buses, announced it was reducing 2019 guidance for a second quarter provision being taken for "ongoing governmental proceedings and measures relating to Diesel vehicles by a high three digit million amount." The company also reduced its return on sales forecast for the vans group from between 0% and 2% to a range of between negative 4% and negative 2%. Consequently, Daimler lowered its group EBIT guidance from "slightly above the prior-year level" to "in the magnitude of the previous year."We lowered our 2019 group EBIT estimate, which excludes China JV equity income, to EUR 9.0 billion from EUR 9.6 billion. Last year's group EBIT was EUR 9.1 billion. Our 2019 EPS estimate declined EUR 0.40 to EUR 6.75 from our previous EUR 7.15 estimate. The change in our 2019 estimates roughly offset the time value of money in our DCF model since our last update, and our fair value estimate on the 5-star-rated shares of Daimler remains unchanged at EUR 85.
In our opinion, Daimler shares offer investors compelling valuation. Uncertainty remains surrounding the ongoing European diesel collusion charges, the declining European diesel demand, higher investment needed in industry-disruptive technologies including mobility services, autonomy, and powertrain electrification, all of which, our fair value estimate already takes into consideration. Daimler's stock currently trades at an attractive 42% discount to our EUR 85 fair value estimate.
Daimler provides a range of transportation products, including passenger cars and commercial vehicles, and also financial services. Co. operates in five segments. Mercedes-Benz Cars sells passenger cars and off-road vehicles under the Mercedes-Benz brand and small cars under the smart brand. The Daimler Trucks distributes its trucks (Mercedes-Benz, Freightliner, FUSO, Western Star, Thomas Built Buses and BharatBenz). The vans of the Mercedes-Benz Vans segment are sold under the brand name Mercedes-Benz and Freightliner. Daimler Buses sells completely built-up buses (Mercedes-Benz and Setra). The Daimler Financial Services division supports sales of Co.'s automotive brands.
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