Join Date: Jun 2001
Location: Catonsville, Md.
DaimlerChrysler is expected to nearly triple operating profit in 2nd quarter
FRANKFURT -- DaimlerChrysler is expected to nearly triple operating profit in the second quarter thanks to a turnaround at Chrysler, but analysts fear high car inventories in the U.S. signal a weak six months ahead.
The 22 analysts polled by Reuters forecast operating profit jumping to 1.87 billion euros ($2.27 billion) on average from 641 million the previous year. The company will report on Thursday.
A reinvigorated performance at long-struggling U.S. subsidiary Chrysler should provide the biggest swing in quarterly earnings, according to analysts' estimates.
A growing domestic economy, very low interest rates and a new range of attractive products is expected to boost operating profit to 402 million euros.
Chrysler posted an operating loss of nearly one billion euros in the second quarter of 2003, although it underwent extensive restructuring under Chief Executive Dieter Zetsche.
Despite the rebound at Chrysler, however, analysts warn that its outlook could deteriorate as high car stocks at U.S. dealers force carmakers to give out more profit-eroding freebies to entice customers.
"The risk that the nascent earnings recovery falls victim to a renewed incentives escalation as inventories are cleared makes us cautious for the second half," Sanford C. Bernstein analyst Stephen Cheetham told clients on Thursday.
By comparison, DaimlerChrysler's Mercedes Car Group is expected to report falling profits on lower car sales.
Mercedes, which reached an agreement with its workforce last Friday to save 500 million euros in labor costs in Germany, hopes new models will provide a significant boost to profits by 2006.
DaimlerChrysler's trucks division is expected to post a rise in second-quarter earnings after rivals like Volvo ratcheted up European market forecasts due to renewed demand in this highly cyclical industry.