Investing.com – Goldman Sachs downgraded its rating on Daimler Truck (ETR:) from “buy” to “neutral” in a note on Monday, reflecting a cautious outlook on the company’s near-term performance and market conditions.
The downgrade is due to a combination of factors, including a declining U.S. truck market and concerns about Daimler’s financial performance. It also reflects broader challenges facing the trucking industry.
Goldman Sachs’ downgrade of Daimler Truck comes at a particularly difficult time for the global truck industry. The brokerage analysis predicts a difficult 2025 for truck manufacturers worldwide, due to a combination of factors.
Despite some improvements in Europe and China, the global truck market as a whole is showing initial signs of a slowdown. The US market, which is important for Daimler, recorded a decline in sales this year and is likely to continue to do so.
“Combined with slower price trends (the latest U.S. producer price index and used truck price trends are declining) and near-peak finished truck inventories in the latest U.S. Class 8 data, we expect both revenue and margin pressure on our truck sales, despite recent modest sequential improvements in freight rates and utilization levels,” the analysts said.
In addition, Goldman Sachs is forecasting a decline in capital spending in the transportation sector, suggesting that demand and investment in the transportation sector will remain subdued for some time. The used truck market is also weakening as fleet owners hold on to their vehicles and sales and prices fall.
Given these challenges, Goldman Sachs expects all major truck manufacturers to lag behind the broader market average over the next two years. The firm’s forecasts suggest there are significant risks to truck deliveries, particularly in the U.S., at least through mid-2025.
Goldman Sachs’ decision to downgrade Daimler Truck to neutral is based on a mix of company-specific challenges and broader industry concerns. A key concern is the significant risk to Daimler Truck’s earnings, particularly in the on-highway segment in the United States, the company’s largest market.
Goldman Sachs believes that there is a high probability of a rapid deterioration in this segment, which could potentially lead to a downward revision of Daimler’s forecast in the third quarter of 2024.
Following the second quarter results and the latest industry data, Goldman Sachs has adjusted its forecasts for Daimler’s development over the next two years. The brokerage house now expects a decline in sales of 3% for 2024 and 11% for 2025.
Accordingly, the forecast for Daimler’s adjusted industrial EBIT was reduced by 7% for 2024 and by as much as 28% for 2025. In line with these more conservative estimates, Goldman Sachs also lowered Daimler’s 12-month price target from €46 to €39.
Despite these downward revisions, Goldman Sachs acknowledges Daimler’s robust balance sheet, which could allow the company to return more cash to shareholders, partially cushioning the impact of these headwinds.
However, strategic uncertainties remain, particularly with regard to Mercedes-Benz’s (OTC:) decision regarding its stake in Daimler Truck. This uncertainty could continue to weigh on investor sentiment and affect the company’s stock performance for the rest of the year.
At 7:06 a.m. (11:06 GMT), Daimler Truck was trading 0.9 percent lower at €34.25.
