* Daimler and VW least vulnerable to delayed European rebound
To us, a rebound in European demand is the key short-term catalyst. Given recent news (short-time work at MAN trucks), we cut our market estimates from -5% to -8%, now believing the European rebound will not materialise before year-end (vs. Q3 assumed before), and lower our operating profit estimates on average by 4% for 2014 and our TPs by 3%. Daimler and VW look the least vulnerable to a delayed rebound.
* Regulatory framework continues to drive truck globalisation
The truck industry is globalising technologically due to converging and tightening emission standards. The related rising R&D costs along with the cyclicality of the industry mean that companies need scale and flexible cost structures, but also that truck OEMs can share components across regions. Long-term, this gives global players, Daimler and Volvo, a cost advantage over local players, and forces the latter to consider M&A.
* Top pick: Daimler – the best of both worlds in trucks
Our favourite truck OEM is Daimler (Buy, TP cut from EUR80 to EUR79) while our stance on VW (Buy prefs, TP cut from EUR226 to EUR224) is based on its light vehicle activities. For CNH Industrial (Hold, TP USD8.4) and Volvo
(Hold, TP cut from SEK95to SEK88), we see no short-term catalysts.