Mercedes-Benz Accelerates With Strong Cash Flow

Giancarlo Perlas February 4, 2024

Mercedes-Benz Group AG is revving up its finances as it just disclosed an industrial cash flow of €11.3 billion ($12.3 billion), outperforming market expectations. The company’s strategic focus on its most lucrative models has propelled its cash flow well beyond last year’s figures, marking a significant achievement in the competitive automotive landscape.

Pivot to Profitability

The focus of Mercedes-Benz on high-margin models has proven to be a lucrative strategy, resulting in an industrial cash flow exceeding the €9.54 billion average estimated by analysts. This comes as a testament to the company’s unmatched experience in navigating through global economic challenges amid the impact of rising interest rates.

Investors welcomed the positive news, propelling Mercedes shares to a 3.3% surge in the early hours of the last trading day – the most significant intraday gain since December 14. This noteworthy market response not only reflects investor confidence but also contributed to trimming the losses incurred over the past year to just over 10%.

In a market where economic headwinds are prevalent, automakers are finding refuge in high-order backlogs. This trend has shielded companies like Mercedes from the full force of global economic challenges. Additionally, the luxury car segment has proven less susceptible to inflation, providing a further buffer against market volatility.

Analysts are now anticipating a strong dividend announcement and the possibility of a new share buyback program. Daniel Roeska, an analyst at Bernstein, suggests that Mercedes should display confidence by not only continuing its dividend but also committing to a new share buyback. Meanwhile, Stifel analyst Daniel Schwarz views the high cash flow as a strong indicator that the company will persevere with its €4 billion buyback initiative initiated in February last year.