BMW's Results Put More Pressure on Car Maker's Shares -- WSJ

By William Boston Features Dow Jones Newswires

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 8, 2017).

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BERLIN -- German luxury-car maker BMW AG raised its full-year earnings outlook, despite weak results for its latest quarter as it invests in electric vehicles and self-driving car technology.

BMW, which is in a tight race for global leadership of the premium car market with Daimler AG-owned Mercedes-Benz and Volkswagen AG's Audi luxury unit, said Tuesday that net income for the third quarter fell 2.8% from a year earlier to EUR1.76 billion ($2.04 billion), while revenue edged up 0.3% to EUR23.4 billion.

The Munich-based auto maker said sales growth for its premium sedans and sport-utility vehicles slowed in the three months through September, while investment in electric vehicles and new technology, such as self-driving features and connecting cars to the internet, weighed on profits.

Overall BMW-brand sales rose 1.2% to 590,415 vehicles in the quarter, but revenue in the automobile division fell 2.4% to EUR21 billion and pretax profit in the division fell 4.6% to EUR1.75 billion.

The third-quarter performance, which was below analysts' consensus forecasts, added to negative investor sentiment that has dogged BMW shares this year.

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"It will not help the stock turn the corner after already being the worst-performing Western [manufacturer] this year," Arndt Ellinghorst, analyst at Evercore ISI, a brokerage, wrote in a note to shareholders.

The stock fell 2.8% to EUR87.42 in Frankfurt trading on Tuesday, underperforming the broader automotive index.

Upgrading its full-year outlook, BMW said it now expects "solid," rather than "slight," earnings growth for the entire group. But it downgraded its outlook for its core automotive business to slight growth, keeping its overall profit-margin target in a range of 8% to 10%.

In a push to gain traction, the company is rolling out new models, such as the 8-series coupe and X7 SUV, and is preparing to launch 25 new battery electric and hybrid vehicles by 2025.

Daimler previously reported a 16% drop in third-quarter profit to EUR2.2 billion, despite a 6% increase in revenue to EUR40.8 billion. Audi reported a quarterly profit of EUR969 million, double the previous year, and a 0.7% increase in revenue to EUR14 billion.

For the first nine months of the year, BMW reported a 9.1% pretax profit margin in the automotive division, compared with 9.7% at Daimler and 9.2% at Audi.

Germany's three big premium car makers are all investing heavily in technology to fend off a challenge from upstarts such as Waymo LLC, the self-driving car unit owned by Google parent Alphabet Inc.

The auto makers are also rushing to develop electric cars as diesel loses favor in the wake of an industrywide crisis sparked by Volkswagen AG's 2015 emissions-cheating scandal. They also face new competition in electric vehicles from Tesla Inc. and a handful of Chinese startups, as well as efforts by rivals such as Volvo and Jaguar Land Rover to develop luxury electric cars.

--Max Bernhard contributed to this article.

Write to William Boston at william.boston@wsj.com

(END) Dow Jones Newswires

November 08, 2017 02:47 ET (07:47 GMT)