Significant 37% decrease in BMW profits; consider selling car stocks indirectly.
Take another spin with BMW in 2024, but buckle up for a bumpy ride
Brace yourselves, BMW fanatics! The German auto giant might shake things up in 2024 as they prepare to face significant profit losses, and it's time to pay close attention to one key factor.
A hefty 37% drop in profit post-taxes, from 7.7 billion euros in 2024 to 4.9 billion is a number that might leave some investors scratching their heads. The sliding sales in China and issues with brakes supplied by Continental didn't help the Munich-based company's cause. The dividend is also expected to take a hit, shrinking from 6 euros to 4.30 euros.
BMW's revenue also experienced a dip, dropping 8.4% to 142 billion euros. Operating profit before interest and taxes plummeted unexpectedly, nearly 38%, to a mere 11.5 billion euros.
A Mixed Bag Ahead
But not all is doom and gloom for BMW. The company expects to see a rise in demand in the coming year, despite the "challenging" situation and the recent tariff increases imposed by the US. BMW foresees the operating profit returning to around the 2024 level, yet they've held off on offering a forecast for the after-tax profit. In the automotive segment, the operating margin suffered a blow of 3.5 percentage points, ending at 6.3%. Management predicts that the margin could fall somewhere between 5.0% and 7.0% in the new year, with the possibility of an even steeper decline if investments decrease and sales increase slightly.
Strong Roots, Shaky Ground
While BMW's most recent results may leave a sour taste, the company's earnings over a longer period are hardly apocalyptic. Although they earned significantly better in the years 2021 to 2023, it's important to note that these impressive figures were boosted by exceptionally high margins due to the COVID-19 pandemic. Before that, the record profit in 2017 was 8.7 billion euros, which puts the current 7.7 billion euros in a somewhat more positive light. However, this doesn't change the fact that the automotive industry is facing a rocky future. Among the hurdles lurking on the horizon are disrupted supply chains, escalating material costs, and tumultuous international trade relations, which are under constant threat from US President Donald Trump’s trade plans.
A Positive Perspective
Despite the dismal results, analysts such as the US bank JPMorgan remain bullish on BMW, holding a "Overweight" rating on the stock. It seems that investors might want to hang in there, as patience will undoubtedly be a virtue moving forward. It's worth mentioning that analysts have a generally positive outlook on BMW in 2025, with a view that stocks might have potential if trade environment improvements and effective strategic planning come to fruition. If the feared tariffs are reduced or eased by July 2025, as anticipated, BMW's future may shine a little brighter.
This article contains insights adapted from dpa-AFX, AlixPartners, and various analyst reports.
Additional Resources:
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Preparing for potential fluctuations in investment decisions, BMW's financial situation might become a subject of interest for investors due to the anticipated drops in profits.
Considering the anticipated reduction in dividends, it's crucial for investors to scrutinize the company's financial performance carefully.
