VOW Volkswagen AG

By Kim Richters

Volkswagen AG reported third-quarter earnings Thursday morning. Here's what you need to know:

SALES: The German car maker beat market forecasts with quarterly sales revenue which fell to 59.36 billion euros ($69.73 billion) from EUR61.42 billion a year earlier. This compares to expectations of EUR59.21 billion based on eight analysts' estimates and provided by FactSet.

OPERATING RESULT: Operating profit--or earnings before interest and taxes--for the period fell to EUR3.18 billion from EUR4.54 billion, but beat analysts' expectations of EUR2.92 billion based on eight analysts' estimates from FactSet.

NET PROFIT: Net profit fell to EUR2.58 billion from EUR3.79 billion, below estimates of EUR2.75 billion, according to a FactSet consensus forecast based on three analysts' estimates.

The company said recovering markets--China being a key driver with deliveries up 3% in the quarter--and measures initiated to cope with the coronavirus pandemic contributed positively to its results.

WHAT WE WATCHED:

AUTO TRENDS: After posting a loss in the second quarter due to the pandemic, Volkswagen returned to profitability in the third. The company said its business "recovered noticeably" in the three months and "the declines in deliveries, sales revenue and profit as of the end of September were significantly more moderate than at the half-year mark."

Analysts at Jefferies see the results as broadly solid, but highlight that the car maker's performance was "relatively muted" compared with the recent sector recovery and performances of competitors such as Ford or Fiat Chrysler.

FREE CASH FLOW: Analysts see Volkswagen's free cash flow of EUR6.2 billion in the quarter as particularly strong, beating Bank of America Global Research's expectations of EUR3.1 billion and UBS's estimate of EUR4.5 billion.

OUTLOOK: Volkswagen confirmed its previous outlook comments for 2020, anticipating sales to be significantly below the previous year and both operating profit before special items and operating profit including special items severely lower than 2019 but still positive.

"Depending on the future course of the pandemic, we are cautiously optimistic that we will be able to continue to stabilize our business in the remaining months of the year," its Chief Financial Officer Frank Witter said.

Write to Kim Richters at kim.richters@wsj.com

(END) Dow Jones Newswires

October 29, 2020 09:04 ET (13:04 GMT)

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