By Cecilia Butini and Jessica Sier

 

Daimler AG shares jumped on Friday after the maker of Mercedes cars reported preliminary results for the second quarter that far exceeded analysts' expectations.

Investors were impressed with the company's turnaround in free-cash-flow generation between the first and the second quarters, particularly given the widespread economic damage caused by the coronavirus pandemic.

Daimler said it expects industrial free cash flow of 685 million euros ($780 million) for the second quarter, a much better result than expectations of a EUR2.11 billion loss, according to a consensus provided by the company.

"This is impressive," said Tom Narayan, analyst at RBC Capital Markets, noting that in the first quarter Daimler posted a EUR2 billion industrial free-cash-flow loss.

Daimler shares were trading 4% higher at EUR3.81 at 0900 GMT.

"We expect Daimler saw a sizable source of cash from inventories in the second quarter," Mr. Narayan said. "We had anticipated this dynamic but not to this extent."

Assisted by the industrial free-cash-flow data, industrial liquidity was at EUR9.5 billion, a EUR200 million increase from the first quarter.

Daimler reported a quarterly adjusted loss before interests and taxes of EUR708 million versus expectations for a EUR1.7 billion loss according to Daimler's consensus. The company also reported that adjusted loss before interest and taxes for Mercedes Cars and Vans was above market expectations.

Analysts at Citi expect modest full-year earnings upgrades based on the stronger cost performance.

"The key debate is around the sustainability of the current strong demand trends," said Angus Tweedie, an analyst at Citi.

 

Write to Cecilia Butini at cecilia.butini@wsj.com and Jessica Sier at jessica.sier@wsj.com

 

(END) Dow Jones Newswires

July 17, 2020 05:56 ET (09:56 GMT)

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