BMW shares slip as revenues disappoint

German carmaker BMW boosted revenues 6.8 percent last year and confirmed on Wednesday it would report record profits, but its shares dipped as turnover came in shy of market expectations.

The growing popularity of leasing rather than buying cars crimped revenue growth at a time BMW is battling currency headwinds from the weak dollar, analysts said.
Revenues climbed to 44.34 billion euros ($57.85 billion) from 41.53 billion euros in 2003, due mainly to an 11 percent rise in revenues to 42.54 billion euros at its core auto division, which is engaged in its biggest product offensive ever.
Adjusted for currency effects, group revenues rose 9.2 percent last year.
"We have achieved all of the targets which were set for the year," Chief Executive Helmut Panke said in a statement.
However, the consensus of analysts' forecasts compiled by Reuters Estimates was for an even more bullish performance, with revenue expectations for last year coming in at 45.31 billion euros.
"I found the revenue figures to be somewhat disappointing," said Sal. Oppenheim analyst Michael Raab, who had forecast 45.4 billion euros.
Raab, who rates BMW a "neutral" with a 36-euro-per-share price target, added that he had expected revenues to rise 11-12 percent when adjusted for currency effects.
Shares in BMW eased 1.3 percent to 32.47 euros by 1209 GMT, underperforming a 0.4 percent decline in the DJ Stoxx European automotive index.
Morgan Stanley estimated BMW had its lowest revenues per unit in the fourth quarter since the third quarter of 2000.
"This could be a function of the worsening FX rate in the quarter, but could also be a result of the 1-Series (compact car) introduction, which could lower the average revenue per unit going forward," it said in a research note.
Analysts pointed to a hefty rise in reconciliations -- which mainly eliminate revenue when dealers lease a car instead of selling it -- as a factor for the lower than expected revenues.
Reconciliations wiped away a total of 7.46 billion euros in revenues, after just 5.43 billion in 2003. This marked a rise of 37.5 percent versus 3.6 percent in 2003.
The company, which narrowly outsold arch rival Mercedes Car Group last year, repeated its expectation that 2005 vehicle sales would hit another record, with all three brands -- BMW, Mini and Rolls-Royce -- generating an increase.
BMW had last outsold Mercedes in 1993, before both groups added mini-cars and super-luxury limousines to their stable of brands.
Reuters data, however, show BMW shares trade at a multiple of 9.8 times estimated 2005 earnings, while DaimlerChrysler, the parent of Mercedes, trades at a multiple of 10.8 times.
BMW will launch the revamped 3-Series mid-sized saloon, the group's best-selling car, in March and analysts say its further success is closely linked to the sales performance of its most important model.
Despite the extreme difficulties most major carmakers face as a result of global overcapacities and the resulting severe pricing pressures BMW has remained one of the industry's few bright spots.
Vehicle sales rose 9.4 percent to a record 1.209 million units in 2004, driven by the successful launch of new products including the 1-Series hatchback, the X3 compact offroader and the Mini Cabrio.
Analysts have been less optimistic about BMW's profit outlook however, due to the company's significant exposure to dollar-denominated U.S. sales, BMW's largest single market.
Landesbank Rheinland-Pfalz cut BMW to "underperformer" from "market performer," predicting BMW cannot fully compensate negative currency and raw material effects this year of around 650 million euros and 100 million, respectively.
Panke warned earlier this month that 2005 profits would not keep pace with car sales as they had in 2004 due to currency exchange rates and high input prices.
BMW's financial services division reported an 8.5 percent rise in turnover to 8.23 billion euros and a 19.1 percent jump in the volume of new customer financing contracts to 20.75 billion euros.
Capital expenditure increased 2.4 percent to 4.35 billion euros in 2004, some 3.23 billion of which were invested in property, plant and equipment, and intangible assets.