BMW On Track for Another Record Year; Blows Doors Off Q3 Street Consensus


BMW continued its winning ways with record volume, consolidated revenue, and consolidated earnings for the third quarter, reporting earnings per share of EUR 1.95, EUR 0.24 higher than the consensus. Given the progress made during the first nine months of the year, the company will likely come in at the top end of its 2012 target of 8%-10% EBIT in the automotive segment.

The achievement is even more outstanding considering the economic conditions in Europe and the fact that the 2012 target was set in 2007 with the initiation of the company’s Number ONE strategy. The Street has already recognized BMW’s performance, as this 3-star-rated stock trades at only a 12.3% discount to the EUR 75 fair value estimate; the stock had spent much of 2012 in 4-star territory.

For the third quarter, consolidated revenue was EUR 18.8 billion, increasing 13.7% versus EUR 16.5 billion in the same period last year. China and Japan were hot markets for the luxury carmaker, with unit sales up 39% and 12%, respectively. Investors were encouraged to see average revenue per unit up 2.8%, even though competitive pressures were high in markets where economic conditions were not as rosy as last year, including Europe, China, and Brazil.

In the United States, BMW models have on average been discounted more than Audi and Mercedes-Benz as the company has had fewer new model introductions this year. However, the launch of the Touring 3 Series and a facelift on the 7 Series completed in the second and third quarters, respectively, should provide a modest boost in the fourth quarter.

EBITDA margin was again disappointingly lower than last year, but still strong for an automotive manufacturer. Third quarter EBITDA was EUR 2.5 billion, declining 7.8% from last year’s EUR 2.7 billion. EBITDA margin was 14.4%, dropping 2.8 percentage points compared with 17.2% a year ago.

The year-over-year decline was attributable to increased research and development expense for future vehicle programs as well as a less favorable product and geographic mix. Even so, the automotive group’s EBIT-based returns on sales were 9.9% and 10.4% for the quarter and nine months, respectively. As a result, analysts are hopeful BMW will report full-year results at the high end of its 2012 target.


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