FRANKFURT -- BMW reaffirmed its guidance for historic highs in 2004 earnings and vehicle sales on Wednesday after a record second quarter, but a market eager for a more upbeat outlook still punished the stock.
A victim of its own success, "BMW has not delivered a really big positive surprise," Invesco fund manager Gerald Roessel said of the stock's underperformance of European peers this year.
Second-quarter pretax profit rose 14.5 percent to 1.084 billion euros ($1.30 billion), BMW said, compared with expectations of 1.06 billion in a Reuters poll of analysts.
The Munich-based carmaker has lit up the sky with a slew of new models that have propelled sales growth this year -- even cruising past its biggest rival, DaimlerChrysler's Mercedes Car Group.
"During the second quarter 2004 ... the BMW group has grown on the back of its product initiative and outperformed the overall market in virtually all of the major international automobile markets," Chief Executive Helmut Panke said.
Revenues for the second quarter rose 16 percent to 11.9 billion euros, while net income jumped 18.1 percent to 671 million, both safely beating consensus forecasts.
With an increase in core automotive margins to 8.4 percent in the second quarter from 7.6 percent in the first, BMW showed that the largest product offensive in its history was finally starting to feed through into higher profitability.
This year alone, the carmaker has launched the 6-series coupe and cabrio, the X3 compact offroader and the Mini Cabrio, with the 1-series compact hatchback due in September.
For the second half of the year, Panke said he expected auto margins to remain near 8 percent versus 8.1 percent in the first six months and 7.2 percent in 2003.
He reiterated group unit sales would rise by a high single- digit percentage rate in 2004 and earnings would grow roughly in line with car sales after an expected "very strong second half".
But shares fell 3.8 percent to 35.64 euros by 1530 GMT, over double the drop in the DJ Stoxx European autos index.
Analysts and investors had hoped for a more concrete outlook since BMW only needs to boost profits by less than 3 percent to fulfill its underwhelming guidance. By comparison, BMW has already improved profits by 8.9 percent in the first half.
"BMW is dampening the hopes that one must have given this strong development in demand," said Metzler Bank analyst Juergen Pieper, referring to BMW's robust vehicle sales growth.
"One expects simply more optimism regarding the margin development and a more ambitious earnings guidance."
With expectations high following strong quarterly results from European peers such as Renault, Morgan Stanley analyst Adam Jonas agreed, saying BMW shares were falling since there was "no change in outlook despite the good numbers".
RELAXED ABOUT FOREX RISK
Chief Financial Officer Stefan Krause told analysts he didn't expect currency headwinds to be an issue in 2004 thanks to considerable hedges BMW had built up and is now using.
Come next year, BMW might see a hit of "a few hundred million euros" in a worst-case scenario, but added it had a range of options to offset this if the euro exchange rate -- crucial given its U.S. sales -- hovers between $1.20 to $1.30.
"What we really don't want to have is any concerns or even catastrophe scenarios out of the market that in all honesty I don't see," Krause said. "I tell you I'm pretty relaxed where 2005 is concerned."
CEO Panke also sought to soothe concerns that Tuesday's 4.4 percent decline in U.S. car sales linked to a recall was more than just a blip, promising rising deliveries in BMW's most important export market in August and for the full year.
July sales worldwide would rise by about 4-5 percent, Panke added, with BMW brand deliveries up around 7 percent while Mini sales should dip due to the ramp-up of its new cabrio model.
Rival DaimlerChrysler also beat forecasts easily last week but lowered its earnings goal for the Mercedes Car Group. It now expects an unspecified dip in operating profit at the flagship division versus its original forecast of stable 2004 earnings.
Mercedes Car Group, which includes the Smart compact and super-luxury Maybach brands, posted an 18 percent drop in second-quarter operating profit to 703 million euros.