Mercedes-Benz Earnings Report

Mercedes-Benz (OTC:MBGAF) shares fell more than 2.5% in European trading on Friday after the German carmaker reported a sharp 64% drop in third-quarter earnings within its core car division, significantly missing analyst expectations.

Adjusted earnings before interest and taxes (EBIT) in the car unit fell to 1.2 billion euros, which was below the consensus forecast of 3.19 billion euros, according to LSEG.

The EBIT margin in the car segment came in at 4.7%, also below the 5.4% expected by analysts.

The decline reflects a continued pullback in luxury spending by Chinese consumers amid an economic slowdown.

> "The Q3 results do not meet our ambitions," said Mercedes CFO Harald Wilhelm, indicating that the company will ramp up cost-cutting measures to address the impact.

One positive aspect was the company’s free cash flow (FCF), which stood at 2.4 billion euros, above the consensus estimate of 2 billion euros.

> “This is important as it supports the dividend and capital return in 2025,” commented RBC Capital Markets analysts. “Capital return is central to our investment thesis for Mercedes.”

Jefferies analysts echoed similar sentiments, noting that the “disappointing miss in Car margin was compensated by strong FCF.”

Mercedes-Benz now anticipates full-year car sales to be slightly lower than last year, with fourth-quarter sales expected to be on par with the third quarter.