Mercedes-Benz's Earnings Look Fine Until You Follow the Cash
Published on 10/29/2026 at 19:10 | Editorial boerse-global.de
Deutsche Bank's Tim Rokossa cut his price target on Mercedes-Benz to 65 euros from 70 on Wednesday but kept his Buy rating, a split verdict that landed the same week UBS's Patrick Hummel trimmed his own target to 42.50 euros from 45.00 while reaffirming Neutral. The shares rose 2.0% on the day. Neither call amounts to an all-clear.
Rokossa's note offered little comfort, conceding that positive aspects are hard to find in the current environment. The lower target signals diminished expectations rather than a change of heart on the stock. Hummel, for his part, is looking past the quarter to the results of the company's strategic overhaul, which he expects alongside the annual report in February.
The Quarter Behind the Caution
Mercedes-Benz reported third-quarter 2026 revenue of 30.7 billion euros, group EBIT of 1.77 billion euros and net profit of 1.52 billion euros. Adjusted group EBIT came in at 1.78 billion euros — down 15% year on year.
The report, released Tuesday, flagged a tougher market in China and higher costs in the final quarter, the same pressures behind the guidance cut. For full-year 2026, Mercedes now expects an adjusted passenger-car return on sales of 2% to 3%, with group EBIT flat against the prior year rather than sharply higher.
Should investors sell immediately? Or is it worth buying Mercedes-Benz?
Where the Numbers Really Pinch
Earnings are only half the story. Free cash flow from the industrial business reached just 172 million euros in the third quarter against a consensus of 422 million euros — a gap wide enough to shift the debate from profits to conversion.
Across the first nine months of 2026, industrial free cash flow totaled 3.1 billion euros. The annual forecast, lowered on Tuesday and confirmed a day later, still points to a figure well below the prior year. That distinction matters: clearing a reduced bar is not the same as restoring past financial strength, and a single better quarter would not prove the weakness has passed.
A Street Still Split
JPMorgan kept Mercedes at Overweight with a 70-euro target on Tuesday, according to media reports, even as analyst Jose M. Asumendi penciled in a roughly 10% cut to consensus group EBIT estimates, citing a weak third quarter and a likely softer fourth. RBC stayed at Sector Perform with a 44-euro target, media reports said — a reminder that the recovery case is far from universally shared.
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Technology on the Horizon
Longer-term optionality comes from the partnership with NVIDIA, expanded on October 16 to cover automated driving systems. A concrete product milestone follows: MB.DRIVE ASSIST PRO, announced October 21, will launch for selected customers in Stuttgart and Munich from late 2026, with orders opening in Germany in the first half of 2027. Neither announcement substitutes for evidence of financial recovery.
What investors need is product progress and cash generation moving in step. Until the industrial cash flow firms up and the company delivers on its lowered targets, the buy calls rest on faith in the overhaul — and the February strategy update is the next real test.
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