DTG: Margin Durability Will Drive Future Confidence Despite Softer Profit Outlook

Analysts have modestly trimmed their fair value estimate for Daimler Truck Holding from approximately EUR 42.53 to EUR 42.06. This reflects a slightly higher discount rate and a softer margin outlook that partially offsets improved top line growth expectations and aligns with the recent reduction in Street price targets.

Analyst Commentary

Recent Street updates point to a generally constructive stance on Daimler Truck Holding, even as fair value estimates and price targets are nudged lower to reflect a more balanced risk reward profile. The modest trimming of targets is largely driven by valuation discipline and a slightly more cautious margin narrative rather than a fundamental shift in long term growth expectations.

Bullish analysts continue to emphasize the company’s solid execution on revenue growth and its leverage to cyclical demand recovery, while more cautious voices focus on the sustainability of margins through a potentially softer macro backdrop and input cost volatility.

In aggregate, the research suggests that upside remains, but that investors need to closely track the company’s ability to deliver on profitability and capital allocation to support current multiples.

Bullish Takeaways

• Bullish analysts highlight that top line growth remains robust relative to peers, which supports the case for multiple resilience even after modest target reductions.
• Improving order trends and a solid backlog are seen as reinforcing medium term earnings visibility, helping to underpin current and slightly lower fair value estimates.
• There is confidence that management can continue to execute on operational efficiencies, offsetting part of the softer margin outlook and preserving attractive return on capital.
• Despite a small cut in price targets, the prevailing Buy ratings indicate that analysts still view the current share price as not fully reflecting the company’s growth and margin potential.

Bearish Takeaways

• Bearish analysts point to rising discount rates and macro uncertainty as reasons to apply more conservative valuation assumptions, limiting near term upside.
• Concerns persist around the durability of elevated margins if demand normalizes or pricing power wanes, which could pressure earnings relative to current forecasts.
• The reset in Street price targets suggests expectations are being recalibrated to account for execution risks in cost control and supply chain management.
• Some investors may remain cautious until there is clearer evidence that free cash flow generation can consistently track earnings, supporting both reinvestment and shareholder returns at current valuation levels.

What's in the News

• Daimler Truck Holding issued earnings guidance for the fourth quarter and full year 2025, signaling confidence in navigating additional tariff costs across key regions (company guidance).
• For Trucks North America in 2025, the company expects unit sales at the lower end of the 135,000 to 155,000 range and return on sales at the lower end of the 10% to 12% corridor, reflecting a more conservative profitability outlook (company guidance).
• Fourth quarter 2025 Trucks North America unit sales are projected to be roughly in line with the third quarter, but profitability is expected to be weaker due to unfavorable mix, fading pricing tailwinds, higher tariff costs, and seasonally higher R&D and SG&A expenses (company guidance).
• Mercedes Benz Trucks full year 2025 profitability is anticipated to land at the midpoint of the 5% to 7% guidance range, supported by expected fourth quarter unit sales about 20% higher than the third quarter, contingent on resolving supplier challenges (company guidance).
• For 2025 overall, Daimler Truck Holding guides revenue to be around the midpoint of its range, with profitability trending toward the lower end and sales expected between the midpoint and lower end of the target corridor (company guidance).

Valuation Changes

• The fair value estimate edged down slightly from €42.53 to €42.06, implying a modest reduction in upside potential.
• The discount rate increased slightly from 8.44% to approximately 8.53%, reflecting a marginally higher perceived risk profile or required return.
• The revenue growth assumption was raised meaningfully from about 2.38% to approximately 4.28%, signaling improved expectations for top line expansion.
• The net profit margin was reduced moderately from around 6.62% to roughly 6.25%, indicating a somewhat more cautious view on profitability.
• The future P/E multiple was trimmed marginally from about 10.79x to approximately 10.73x, pointing to a slightly more conservative valuation framework.