Daimler raises profit forecast on Mercedes demand

Daimler AG, the world's second- biggest maker of luxury vehicles, raised its earnings forecast by 74 percent after demand for Mercedes-Benz cars fueled a return to profit in the first quarter.

Net income was 667 million euros ($888 million), or 65 cents a share, compared with a loss of 1.32 billion euros, or 1.40 euros, a year earlier, the Stuttgart, Germany-based company said today. Analysts had projected a 427 million-euro profit, according to the average of five estimates compiled by Bloomberg.

Daimler is seeking to close the gap with luxury market leader Bayerische Motoren Werke AG and fend off Volkswagen AG's Audi. The Mercedes-Benz maker aims to gain market share this year by introducing an extended version of its full-size E-Class sedan, its first vehicle targeted exclusively for the fast- growing Chinese market. Deliveries of Mercedes vehicles in China more than doubled in the first quarter.

"Daimler is benefiting from the underlying market uptrend," said Juergen Pieper, an analyst at Bankhaus Metzler in Frankfurt, who recommends buying the stock. "The numbers are positive but not really surprising. I'm expecting profit to continue to recover in coming quarters."

The shares fell as much as 1.16 euros, or 2.9 percent, to 38.31 euros in Frankfurt. They had gained almost 9 percent since April 19, when Daimler unexpectedly raised its outlook for the Mercedes cars and heavy truck units.

'Momentum Gone'

"The momentum of earnings upgrades is currently gone," said Arndt Ellinghorst, a London-based analyst with Credit Suisse, who has an "outperform" rating on the stock.

Daimler, also the world's largest truckmaker, now projects full-year earnings before interest and taxes of more than 4 billion euros, compared with its previous forecast of more than 2.3 billion euros.