Jefferies Upgrade and Revised Outlook for Mercedes‑Benz Group AG
Jefferies raised its rating on Mercedes‑Benz Group AG from “hold” to “buy” and reduced its price target to €52, down from the previous €60, citing a supportive margin outlook and a full‑year consensus that the broker believes is overly optimistic.
The brokerage expects the Cars division to deliver a second‑quarter margin of 3.2 % and the Vans division 8.8 %, generating approximately €800 million of free cash flow in the quarter. For the full year 2026, Jefferies projects a Cars margin of 3.7 % and a Vans margin of 8.9 %.
Jefferies notes that second‑quarter volumes in China fell short of modest expectations, but it anticipates a recovery in the second half of the year driven by new model launches such as the localized GLE, the new GLC and the S‑Class. In the United States, a higher mix of six‑ and eight‑cylinder engines and an increased AMG presence are expected to keep U.S. tariffs in the range of 150–200 basis points.
European markets are described as showing the strongest momentum, with battery‑electric vehicle orders in the region doubling year‑on‑year in the first quarter and maintaining a solid pace in the second quarter.
On the cost side, Mercedes‑Benz has achieved 80 % of its fixed‑cost reduction target for the 2024‑27 period, is slightly behind on material‑cost reductions, and is on track to cut total investments to about €11 billion by 2027.
Capacity adjustments include a 10 % reduction at the Bremen and Rastatt plants in Germany, while the Kecskemet facility in Hungary is being expanded to become the group’s largest EU plant, operating at roughly 70 % lower running costs than German sites. In China, production capacity has been trimmed by 15 % to 680,000 units from 800,000 units.
Jefferies lowered its 2026 full‑year adjusted EBIT estimate by 10 % to roughly €6.4 billion and revised the earnings‑per‑share forecast to €4.99, down from €5.56. The broker highlights that buybacks remain central to capital allocation, supported by organic free cash flow and disposals, including an expected €1 billion proceeds from the Athlon sale in the second half of the year, as well as smaller disposals of German dealers, Blacklane, and earmarked disposals of Daimler Truck shares.
The analyst notes that the shares are trading at about 7.9 times the 2027 cash‑R&D‑adjusted earnings estimate, delivering a free‑cash‑flow yield of 11.6 %.
Overall, Jefferies views Mercedes‑Benz as leading German automakers in restructuring cadence, product launches and capital allocation, while acknowledging that EU automakers remain sensitive to policy decisions.