Electrification Shift And Trade Risks Will Test Legacy Margins

Key Takeaways

• Heavy reliance on traditional trucks and slow zero-emission rollout expose Daimler Truck to declining demand, regulatory cost pressures, and margin erosion.
  
• Geopolitical risks, intensified competition, and weak North American orders threaten future earnings stability and limit revenue visibility.
  
• Strong operational efficiency, leadership in sustainable vehicles, resilient demand, proprietary technology investments, and robust shareholder returns position Daimler Truck for long-term profitability and growth.

Catalysts

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

• The accelerating global shift toward electrification and alternative modes of transportation is set to structurally reduce total demand for long-haul trucking and traditional internal combustion vehicles. Daimler Truck remains heavily reliant on these segments for both revenue and earnings, exposing the company to significant top-line declines if the market contracts faster than their electric and hydrogen product ramp can compensate.
  
• Stricter global emissions regulations and environmental mandates are expected to continue increasing research and development costs, accelerating the obsolescence of Daimler Truck's existing product lines. These higher compliance costs will weigh heavily on net margins, especially as the company faces delays in bringing competitive zero-emission trucks to scale in core markets like North America.
  
• Increased focus on supply chain localization and political deglobalization threatens to disrupt Daimler Truck's international manufacturing and sales strategies. The company's recent requirement to rapidly rebalance production between Mexico and the US in response to tariff threats illustrates rising execution risk and margin volatility as trade restrictions become more prevalent.
  
• Intense competition from new entrants and established technology leaders in electric and autonomous trucks, such as Tesla and BYD, is likely to further compress gross margins and destroy pricing power. Daimler Truck's slow progress in zero-emission vehicle development, combined with delays in large-scale adoption, risks significant erosion of its current market share and future earnings streams.
  
• Production cuts, headcount reductions, and persistently weak order intake in North America throughout 2025 reveal Daimler Truck's overexposure to cyclical end-markets and expose it to pronounced earnings volatility. With order trends still highly uncertain and dealer inventories elevated, forward revenue visibility remains poor and recurring earnings are at risk of further downgrades if demand does not recover.

Daimler Truck Holding Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Daimler Truck Holding compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Daimler Truck Holding's revenue will grow by 1.9% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 4.5% today to 6.6% in 3 years time.
• The bearish analysts expect earnings to reach €3.7 billion (and earnings per share of €4.62) by about August 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 bearish analyst cohort, the company would need to trade at a PE ratio of 7.2x on those 2028 earnings, down from 13.4x today. This future PE is lower than the current PE for the DE Machinery industry at 18.4x.
• Analysts expect the number of shares outstanding to decline by 4.78% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.66%, as per the Simply Wall St company report.

Daimler Truck Holding Future Earnings Per Share Growth

Risks

• Daimler Truck's strong execution on cost transformation programs, including a targeted €1 billion cost reduction in its Europe operations and expanded investment in automation and efficiency, could drive significant improvements in operational efficiency and expand net margins over the coming years.
  
• Continued global investment in electric and hydrogen-powered trucks and buses positions Daimler Truck as a leader in sustainable commercial vehicles, enabling revenue growth and premium pricing as decarbonization and fleet electrification accelerate across key global markets.
  
• A significant uptick in orders in July, strong market share (such as 41% in North America for Class 8 and leading position in heavy-duty electric trucks in Europe), and robust momentum in regions like Latin America and Asia indicate that underlying demand and market positioning remain resilient, supporting stable or growing revenues.
  
• Ongoing investments in proprietary connectivity, telematics, software-defined vehicles (via the Coretura JV with Volvo), and digital aftersales solutions are poised to generate recurring, higher-margin revenue streams that can strengthen overall group earnings.
  
• Strategic capital allocation, including consistent share buybacks, dividends, and confidence in exceeding €6 billion of net industrial liquidity by year-end, highlights strong shareholder return policies and effective cash generation, which could support firm equity valuations.

Valuation

• The assumed bearish price target for Daimler Truck Holding is €32.0, which represents the lowest 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 more bearish 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 bearish analysts, you'd need to believe that by 2028, revenues will be €55.5 billion, earnings will come to €3.7 billion, and it would be trading on a PE ratio of 7.2x, assuming you use a discount rate of 7.7%.
  
• Given the current share price of €41.76, the bearish analyst price target of €32.0 is 30.5% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• 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.