Digitalization And Decarbonization Will Transform Global Heavy Truck Markets

Key Takeaways

• Rapid efficiency gains and electrification leadership are driving industry-leading margins and positioning the company to outperform current expectations across core operations.
  
• Diversification into software, defense, and aftersales is stabilizing earnings and unlocking higher-margin, recurring revenue streams, setting up for sustained outperformance.
  
• Heavy reliance on diesel sales, slow electric transition, and regulatory, supply chain, and competitive pressures threaten margins, earnings stability, and market share.

Catalysts

Manufactures and sells light, medium- and heavy-duty trucks and buses in Europe, North America, Asia, Latin America, and internationally.

• Analyst consensus expects cost reduction from European restructuring and the Cost Down Europe program, but they may be underestimating the pace and scale of efficiency gains as Daimler Truck is now delivering ahead-of-plan both in headcount and SG&A reduction, with execution momentum that could bring industry-leading net margins by 2026, several years earlier than anticipated.
  
• Analysts broadly agree the ramp in zero-emission vehicles and platform leadership will drive revenue growth as regulations tighten, yet the company's accelerating shift-proven by dominant market share in heavy-duty electric trucks in Europe and surging eCitaro sales-positions Daimler Truck to capture an outsized share of the high-margin electrification wave, with incremental gross margin improvement as scale is achieved, much faster than consensus expects.
  
• Daimler Truck's far-sighted investments in digitalization and the Coretura software joint venture with Volvo Group set the stage for a radical transformation from hardware sales to recurring high-margin software and fleet management revenues, meaning future earnings could exceed current forecasts as monetization of data and connected services rapidly scales in parallel with vehicle sales.
  
• The company's growing role in the defense and specialized vehicle market-with large Bundeswehr contracts and expansion into emerging markets like Senegal-signals a new, countercyclical revenue stream that is less vulnerable to macro swings, providing a stabilizing underpinning for group earnings and potential upward surprises amid civilian truck market volatility.
  
• Global parts infrastructure investment of five hundred million euros, including the new Halberstadt parts center and expanded aftersales focus, will unlock recurring, higher-margin revenues from the installed base and further improve net margins and cash flow resiliency, supporting a structural re-rating of earnings quality beyond what is currently priced into the stock.

Daimler Truck Holding Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Daimler Truck Holding compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Daimler Truck Holding's revenue will grow by 6.5% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 4.5% today to 7.2% in 3 years time.
• The bullish analysts expect earnings to reach €4.5 billion (and earnings per share of €6.4) by about September 2028, up from €2.4 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 10.7x on those 2028 earnings, down from 12.0x today. This future PE is lower than the current PE for the DE Machinery industry at 19.0x.
• Analysts expect the number of shares outstanding to decline by 3.31% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.86%, as per the Simply Wall St company report.

Daimler Truck Holding Future Earnings Per Share Growth

Risks

• Daimler Truck faces elevated regulatory and cost pressures from ongoing tightening of emissions regulations in the EU and the US, which is already leading to significant restructuring provisions and development cost impairments, ultimately squeezing operating margins and requiring heavy capital outlays.
  
• The company's electric vehicle transformation is progressing slower than anticipated, especially in the critical North American market, as highlighted by the €218 million impairment for delayed ZEV technology, and this lag risks eroding future revenue growth as secular electrification accelerates.
  
• Daimler Truck remains heavily dependent on legacy diesel vehicle sales, forcing the company to balance diminishing returns on its traditional portfolio with costly R&D and parallel investments in electrification, increasing the risk of margin compression and lower earnings over the long term.
  
• Ongoing supply chain volatility, coupled with inflationary pressures and tariff-related disruptions (including US-Mexico and EU trade tensions), has resulted in production cuts and fluctuating input and labor costs, undermining the stability and predictability of both revenues and net profits.
  
• Intensifying competitive threats from non-traditional truck manufacturers and technology-led entrants, along with a potentially shrinking truck market due to freight decarbonization, regulatory shifts, and alternative logistics models, place persistent downward pressure on Daimler Truck's market share and long-term topline revenue.

Valuation

• The assumed bullish price target for Daimler Truck Holding is €56.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Daimler Truck Holding's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €56.0, and the most bearish reporting a price target of just €32.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €63.3 billion, earnings will come to €4.5 billion, and it would be trading on a PE ratio of 10.7x, assuming you use a discount rate of 7.9%.
• Given the current share price of €37.54, the bullish analyst price target of €56.0 is 33.0% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.