Jefferies raised its recommendation on Mercedes-Benz Group AG to "buy" from "hold" and simultaneously lowered the firm's price target to €52 from €60, citing what it described as supportive guidance and a full-year consensus that it considers "tired" and in need of adjustment.
The upgrade followed Jefferies' participation at its German-Swiss conference on June 23, where analysts said the messaging from Mercedes felt constructive and aligned with a reiterated margin outlook. The brokerage also highlighted Mercedes-Benz Group's relative lead among German automakers "in the cadence of restructuring, product launches and capital allocation."
Forecasts and near-term results
Jefferies laid out divisional expectations for the second quarter, forecasting a Cars division margin of 3.2% and a Vans margin of 8.8%, alongside projected free cash flow of approximately €800 million. For the full year, the firm expects the Cars margin to reach 3.7%.
On regional trends, Jefferies said second-quarter volumes in China fell short of even modest expectations, with the company prioritizing pricing. Improvement is expected in the second half as several model launches come to market, including GLE localization, the new GLC and the S-Class.
In the United States, the dealership mix is helping to offset weaker China volumes, supported by the return of six- and eight-cylinder engine offerings. Jefferies warned, however, that a heavier AMG and engine mix could keep the impact of U.S. tariffs in the range of 150-200 basis points.
Europe, the brokerage noted, shows the strongest current momentum. Battery-electric vehicle orders were up two times year-on-year in the first quarter and the second quarter is tracking at a solid pace, according to Jefferies.
Cost reductions, capacity moves and investment plans
On costs, Jefferies said Mercedes-Benz has achieved 80% of its fixed-cost reduction target against its 2024-27 objectives, while it is running slightly behind on savings from materials. The company remains on course to reduce capital spending toward €11 billion by 2027.
Capacity adjustments are also underway: German capacity has been reduced by 10% at Bremen and Rastatt. Meanwhile, the Kecskemet plant in Hungary is being scaled up to become the group's largest European facility, operating with running costs roughly 70% lower than comparable German sites. China capacity has been resized down by 15%, from 800,000 to 680,000 units.
Earnings revisions and valuation
Jefferies trimmed its 2026 full-year adjusted EBIT forecast by 10% to about €6.4 billion, maintaining Cars margin at 3.7% and projecting a Vans margin of 8.9% for that year. The brokerage reduced its estimate for full-year 2026 earnings per share to €4.99, from a prior €5.56.
On valuation metrics, Jefferies said Mercedes shares trade at 7.9 times its 2027 cash research-and-development-adjusted earnings estimate, with an implied free-cash-flow yield of 11.6%.
Capital allocation and disposals
The brokerage emphasized that buybacks remain a central element of Mercedes' capital-return strategy and are proceeding as planned, financed through a combination of organic free cash flow and targeted disposals. Jefferies expects about €1 billion to come from the sale of Athlon, anticipated to close in the second half, together with smaller disposals such as German dealers and Blacklane, and the earmarked disposal of Daimler Truck shares.
Jefferies concluded that EU automakers generally "remain challenged, sensitive to EU policy decisions with supportive bsheets."
Market services mention
Readers were also directed to follow real-time stock swings and analyst updates on InvestingPro.
Investment tool note
A promotional note within the original coverage described a ProPicks AI tool that evaluates MBGn among many companies using over 100 financial metrics. The note says the AI has no bias and identifies stocks offering favorable risk-reward profiles, and cites past winners highlighted by that tool, including Super Micro Computer (+185%) and AppLovin (+157%). The promotion asked whether MBGn is currently featured in any ProPicks AI strategies or whether there are alternative opportunities in the same sector.
Bottom line
Jefferies' upgrade to "buy" reflects confidence in Mercedes' margin guidance and progress on restructuring and capital allocation even as the firm trims near-term earnings forecasts and lowers its price target. The brokerage points to regional differences in demand, continued cost actions and a capital-return plan anchored by buybacks and disposals as key drivers of its view.