Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Bayerische Moteren Werke AG News: BMW Says Profits Are Looking Up

By John Rosevear - Mar 25, 2014 at 4:19PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Competition is getting tougher, but BMW says sales and profit will rise in 2014.

BMW SUVs like this X3 have proven to be huge sellers in markets around the world. Those sales are expected to boost BMW's profits in 2014. Photo credit: BMW.

BMW ( BAMXF 0.46% ) has seen profits dip in recent quarters. While sales have been strong, the German luxury-car giant has felt the need to invest more in new technologies and new models, as rivals like Volkswagen's ( VWAGY -2.54% ) Audi division have become more aggressive.

Both Audi and Daimler's ( DDAI.F -0.76% ) Mercedes-Benz have said they aim to overtake BMW in global sales within the next several years. Meanwhile, other well-funded luxury brands such as General Motors' ( GM -2.15% ) Cadillac and Nissan's ( NSANY 2.35% ) Infiniti are planning aggressive expansions into BMW's established market turf.

Despite all that, BMW executives said last week they expect the company's profit to rise in 2014. In this video, Fool contributor John Rosevear looks at BMW's prospects for 2014, as well as the automaker's expectation to gain ground this year despite the competitive threat.

A transcript of the video is below.

If you're interested in getting exclusive, unfiltered access to Motley Fool co-founder and CEO Tom Gardner's personal "Everlasting Portfolio" of stock picks -- a portfolio that has outperformed a stunning 99.6% of similar mutual funds over the past 12 months -- you're in luck. For a limited only, Tom is inviting new members to apply for "early acceptance" into The Motley Fool's crown-jewel service: Motley Fool ONE. If accepted, you'll be invited to test-drive Motley Fool ONE with zero risk or obligation for an entire 365 days. Simply click here to apply now ... time is running out!

John Rosevear: Hey Fools, it's John Rosevear, senior auto analyst for Fool.com. We talk a lot about how the global luxury car market is booming right now, and one of the big beneficiaries of that trend has been BMW.

BMW issued its annual report this past week, and they say that their future is looking pretty bright. The company's profits have been down a bit recently as BMW has stepped up its investments in new products and advanced technology. Profits were down 14% in the fourth quarter of 2013, but they say pre-tax profits will rise in 2014, and they're looking at raising production capacity at their big SUV factory in South Carolina and planning to release 12 new models this year.

Meanwhile, they've expanded production capacity in China and expect to build 400,000 vehicles there this year, up from 300,000 last year. They think profits and sales will both rise significantly in 2014. Last year was a record in terms of sales numbers for BMW, they delivered 1.96 million vehicles, but they expect single-digit growth in the U.S. and low double-digit growth in China in 2014.

Given everything that's going on in Europe, and the increasing competition in the luxury vehicle market, it was definitely a confident forecast and it was something of a surprise. In recent months BMW Chief Financial Officer Friedrich Eichiner and other BMW executives have taken a more subdued tone, talking about the need for heavy investments to keep up with Audi and Mercedes-Benz and other competitors, so to come out and say, hey, we think profits will be up this year, that's a pretty strong statement, and the stock hit a record high on Wednesday after it came out.

What Eichiner actually said is that they expect a percentage increase in pre-tax profits in the high single digits. We talk about BMW's profits being subdued, but they actually made about $11 billion in 2013; that's more than GM or Ford made, and BMW sold a lot fewer vehicles.

But as we keep saying here, luxury vehicles are more profitable than mass-market ones, and that's why you see both GM and Ford and a lot of other companies making big investments in their luxury vehicle brands right now. So a strong outlook for BMW in 2014 despite the fact that pretty much the whole global auto industry seems to be gearing up to try to eat their lunch. BMW investors did well this week, but don't sell yet because the future is looking good. Thanks for watching.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

General Motors Company Stock Quote
General Motors Company
GM
$59.71 (-2.15%) $-1.31
Volkswagen Aktiengesellschaft Stock Quote
Volkswagen Aktiengesellschaft
VWAGY
$28.45 (-2.54%) $0.74
Nissan Motor Co., Ltd. Stock Quote
Nissan Motor Co., Ltd.
NSANY
$9.94 (2.35%) $0.23
Daimler AG Stock Quote
Daimler AG
DDAI.F
$96.76 (-0.76%) $0.74
Bayerische Motoren Werke Aktiengesellschaft Stock Quote
Bayerische Motoren Werke Aktiengesellschaft
BAMXF
$99.20 (0.46%) $0.45

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
640%
 
S&P 500 Returns
139%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/03/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.