Luxury Brands Poised for Resilience as Q3 Earnings Approach
Zurich, Switzerland – In a European automotive market showing varied performance, premium brands BMW and Ferrari are standing out as “Buy” rated picks by UBS, ahead of their September quarter earnings reports. The investment bank anticipates that both companies are well-positioned to navigate current economic headwinds, with Ferrari leveraging its unparalleled luxury status and strong pricing power, and BMW expected to deliver solid financial results despite some market challenges.
BMW: Navigating Headwinds with Long-Term Vision
BMW is projected to report an automotive EBIT margin of 5.2% for the third quarter, aligning with the lower end of its fiscal year 2025 target. While a slight dip from Q2’s 5.4% is expected due to dealer compensation and adverse pricing in China, free cash flow is set to remain positive at around €0.8 billion. UBS notes that BMW likely overpaid tariffs, with a refund anticipated for the US/EU tariff agreement. Despite underperforming volume expectations in China, BMW is on track to meet its full-year 2025 guidance.
Looking ahead, UBS foresees moderate automotive EBIT margin growth and significant free cash flow improvement in 2026, driven by the commercial launch of the innovative Neue Klasse platform and decreasing investments. This could potentially support a substantial 12% total cash return.
Berenberg analysts have also reiterated a Buy rating on BMW, acknowledging short-term pressures but highlighting the company’s long-term potential.
Ferrari: Unwavering Luxury and Strategic Growth
Ferrari, set to report its Q3 results on November 4th, is forecast by UBS to achieve group sales of €1,705 million, representing a robust 5% growth at constant currency, primarily fueled by strong price-mix. Revenues for Cars and Spare Parts are expected to increase by 4% at constant currency, with personalization options contributing significantly to a 6% price-mix despite a modest decline in shipments.
While Q3 earnings might take a backseat to the upcoming Capital Markets Day on October 8-9 – where management will unveil new medium-term targets and reveal Ferrari’s first electric vehicle – UBS believes any potential stock pullback would offer an attractive entry point for investors. This sentiment is particularly strong given the current limited visibility on a broader luxury sector recovery.
In recent analyst updates, HSBC and Deutsche Bank upgraded Ferrari to a Buy rating, reflecting confidence in its continued growth and luxury market dominance.
