Volkswagen Sees Lower 1Q Earnings - Analyst Blog

Germany’s Volkswagen AG (VLKAY) posted a 37.6% fall in earnings to €4.18 ($5.50) per share in the first quarter of 2013 from €6.70 in the same quarter of 2012. Net earnings declined 35.2% to €2.0 billon ($2.7 billion) from €3.1 billion in the first quarter of 2012.

The lower earnings were attributable to lower revenues generated from the company’s Automotive segment owing to deteriorating European markets.

Revenues in the quarter dipped 1.6% to €46.6 billion ($61.5 billion). However, Volkswagen’s global deliveries increased 4.8% to 2.3 million vehicles while vehicle sales rose 5.1% to 2.4 million vehicles.

Revenues from the Automotive segment fell 3.5% to €41.1 billion ($54.3 billion) while operating profits from the segment ebbed 31.7% to €1.9 billion ($2.5 billion) from €2.8 billion a year ago. However, revenues from the company’s Financial Services segment grew 15.8% to €5.4 billion ($7.2 billion) while operating profit grew 21.3% to €416 million ($549.1 million) from €343 million a year ago.

Volkswagen had cash, cash equivalents and time deposits of €23.2 billion ($30.7 billion) as of Mar 31, 2013 compared with €18.5 billion as of Dec 31, 2012. The company’s current liabilities increased to €114.4 billion ($151.1 billion) as of Mar 31, 2013 from €105.5 billion as of Dec 31, 2012.

In the first quarter of the year, Volkswagen’s cash flow from operations improved 75.3% to €2.5 billion ($3.4 billion) from €1.5 billion in the same quarter a year ago. Meanwhile, capital expenditures remained almost flat at €1.7 billion ($2.3 billion) compared with the prior-year level. Net cash flow was €120 million ($158.4 million) compared with a net cash outflow of €1.3 billion a year ago.

Volkswagen, a Zacks Rank #4 (Sell) stock, has targeted to become the world’s largest carmaker both in terms of sales and profitability by 2018 based on the strength in emerging markets, including Brazil, Russia, India and China. Other European automakers that are affected by the weakening European market include Daimler AG (DDAIF) and Fiat SpA (FIATY).

While we intend to avoid Volkswagen, other stocks that is worth a look includes Peugeot S.A. (PEUGY), which carries a Zacks Rank #2 (Buy).

(Exchange Rate: €1 = $1.32)

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