🎈 Up Big Today: Find today's biggest gainers with our free screenerTry Stock Screener

UBS confident in BMW shares with consensus-aligned auto margins and strong financial position

EditorAhmed Abdulazez Abdulkadir
Published 03/12/2024, 11:56 pm
© Reuters.
BMWG
-

On Tuesday, UBS expressed a more optimistic stance on Bayerische Motoren Werke AG (BMW (ETR:BMWG):GR) (OTC: BMWYY (OTC:BMWKY)), upgrading the stock from Neutral to Buy and increasing the price target to €83.00, up from the previous target of €75.00. The firm indicated a positive outlook on the automaker's financial stability and potential cash returns to shareholders.

The upgrade comes with an anticipation of a stable automotive EBIT (earnings before interest and taxes) margin for BMW and improved free cash flow (FCF) by 2025. UBS suggests that the consensus estimate for BMW's automotive margin, currently at 6.5%, aligns with their expectations. This assessment is based on the belief that the company's financial performance will remain robust, contrary to what may be expected for other original equipment manufacturers (OEMs).

During a recent North American roadshow, BMW's Chief Financial Officer remarked that automotive FCF may not be the sole determinant of the company's cash returns to shareholders. Building on this insight, UBS predicts that BMW could sustain a yield of approximately 15% through dividends and share buybacks in the coming years.

The analyst's commentary also addresses BMW's financial position, noting the company's significant net financial assets, which exceed €40 billion against a market capitalization of around €43 billion. UBS suggests that BMW's approach could, at least directionally, begin to resolve what is perceived as an inefficient balance sheet.

The upgrade by UBS reflects a confidence in BMW's capability to manage its financial assets effectively and to potentially reward its shareholders generously. This move by UBS positions BMW as their new top pick within the European automotive sector, while the firm has downgraded its ratings for competitors Mercedes-Benz (OTC:MBGAF) Group (MBG) and Porsche (ETR:P911_p) (P911) to Neutral.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.