DaimlerChrysler "buy"

07.07.06 - AC Research

LONDON, July 7 (newratings.com) - Analyst Henning Wagener of AC Research reiterates his "buy" rating on DaimlerChrysler AG (DCX).

According to AC Research?s research note dated July 6 and published this morning, the company has reconfirmed its earnings guidance for the current fiscal year of 2006. The President of the Board, Dieter Zetsche, said DaimlerChrysler is well on its way to reaching its operating profit target for the ongoing year of more than ?6 billion. The segments that contributed to these profits have seen some unexpected movements, the company said, without providing further details in the same.

The analyst considers the company?s sales problems, in particular in the US, as concern areas. In June, Chrysler suffered a 15% decline in sales to 185,946 units in the US, losing above all some market share to Japanese competitor Toyota, the analyst reports. Mercedes, on the other hand, delivered a better performance, AC Research says. The company could increase its sales by 14% to 20,802 vehicles, the analyst adds. Chrysler?s considerable decline in sales may, above all, be attributed to the high gasoline prices, prompting more and more Americans to buy cars with more economical fuel consumption, the analyst elaborates. On top of that, the continuing interest rate hikes in the US prevent more and more consumers from buying passenger cars, AC Research points out. After all, Chrysler also suffered from relenting car fleet sales, the analyst says.

In order to reduce the sales problems in the US market, Chrysler launched a new programme to support car purchases, which, on the other hand, could have a negative impact on margins, according to AC Research. In all, however, against the background of Chrysler?s offensive model policy, the analyst expects the company?s sales to improve in the second half of 2006.

At the current share price of ?38.15 and a 2007 P/E ratio of about 10, the company?s stock still seems to enjoy a rather moderate rating, AC Research mentions. Currently, the performance of Mercedes is rated positive, the analyst says. In case of Chrysler, the company plans to launch eight new models in the second half of 2006, which will probably boost sales, the analyst adds.

AC Research reiterates its "buy" rating on DaimlerChrysler.