Daimler forecast a jump in profit this year at its main luxury car division after strong sales of new models such as the S-Class limousine in the United States and China helped it to beat quarterly earnings forecasts.
Having dropped to third place in luxury car sales rankings behind German rivals BMW and Volkswagen's Audi in 2011, Daimler's premium car division Mercedes-Benz narrowed the gap in 2013 thanks to its redesigned vehicles, which also include new compact cars such as the A-Class sedan.
"The numbers are good, outlook is good, it's all good," Metzler Bank analyst Juergen Pieper said. "Daimler came off its high horse, realised they were no longer in front and began to fix things."
Daimler said on Thursday it expected group earnings before interest and taxes (EBIT) from ongoing business to "increase significantly" in 2014, based on improved profitability at its trucks and cars units.
Its shares were up 3.8 percent to 63.16 euros by 0930 GMT, putting them among the top gainers on Germany's blue-chip DAX index. They were lifted in part by a dividend increase to 2.25 euros a share from 2.20 euros.
The positive results appear to turn around a string of disappointing earnings overseen by the chief executive Dieter Zetsche, who was forced to scrap margin targets at Mercedes-Benz in late 2012.
The Stuttgart-based maker of cars and trucks reported fourth-quarter adjusted EBIT of 2.53 billion euros ($3.42 billion), above the 2.32 billion euros forecast by analysts in a Reuters poll.
Mercedes-Benz sales volumes in Europe and the United States rose, offsetting a slight decline in Daimler's German home market. Also, after a period of flagging sales, Mercedes-Benz's deliveries in China jumped 15 percent to 239,000 cars in 2013.
Profitability at Mercedes-Benz also improved, with the return on sales from ongoing operations widening to 8 percent in the quarter, up from 5.3 percent in the year-earlier period.
Marc-Rene Tonn, an autos analyst at M.M. Warburg said Daimler's results appeared to be solid, "There is no hair in the soup this time."
Mercedes-Benz may still have some way to catch up with profitability at BMW and Audi, however. In the third quarter, BMW's operating margin for its cars division was 9 percent, while Audi's was 9.4 percent.
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Carmakers are generally upbeat about global sales this year. Worldwide, auto sales in 2014 are seen rising 3.4 percent, according to research firm IHS, while LMC Automotive sees an increase of 5 percent.
Premium carmakers are