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Daimler Earnings Seen Higher, Still Lagging BMW

FRANKFURT, Feb 5 (Reuters) - Germany's Daimler is expected to post a surge in fourth-quarter profit on Thursday as its rejuvenated Mercedes-Benz model range helps Chief Executive Dieter Zetsche to turn around a legacy of profit warnings.

Automakers are 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 auto makers are expected to benefit disproportionately from such growth.

Daimler, the Stuttgart-based maker of cars and trucks is expected to report its adjusted earnings before interest and tax (EBIT) rose 34 percent to 2.32 billion euros ($3.14 billion) in the fourth quarter, a Reuters poll showed.

Mercedes is enjoying a sweet spot in its product cycle, having launched a refreshed E-Class and an all new S-Class flagship sedan in 2013, it will roll out a new version of its best-selling model, the C-Class, this year.

Having dropped to third place in the luxury-sales rankings behind German rivals BMW and Volkswagen's Audi in 2011, Daimler narrowed the gap in 2013 thanks to its redesigned vehicles.

In the twelve months Daimler's shares have risen nearly 40 percent and the stock is now trading on a forward price-to-earnings ratio of 10.6, compared with 9.9 at Bavarian rival BMW and 7.9 at Volkswagen, the parent company of Audi.

Zetsche's goal is for Daimler to become the world's biggest premium carmaker by the end of the decade. But he was forced to scrap margin targets at Mercedes-Benz Cars in late 2012. Earnings goals have been repeatedly scrapped as Mercedes failed to match rivals' scale and efficiency in smaller cars, or their advances in China.

Daimler's supervisory board last year agreed to extend Zetsche's contract by three years instead of an expected five, to soothe investor concerns over his failure to meet guidance and keep up with rivals.

"We continue to believe that the majority of good Mercedes Cars news is priced into the stock. Valuation and lack of earnings momentum leave limited upside," analysts at ISI Global said in a note, adding that they believed Daimler results would be solid and even beat consensus expectations.

"It remains a fact that Mercedes Cars de facto employs 40 percent more workers to sell 20 percent fewer cars compared to BMW," ISI said.

Daimler has also suffered problems at its sales organisation in China, causing it to fall behind BMW and Audi in the largest car market in the world.

In 2013, deliveries of Mercedes-Benz luxury cars rose 10.7 percent to 1.46 million autos, lagging BMW, which sold 1.65 million BMW branded cars, up 7.5 percent on the year-earlier period. Volkswagen's premium car brand Audi saw sales surge 18.4 percent to 1.57 million cars in the same period.

Daimler also lags its rivals in terms of profitability. In the third quarter, BMW's EBIT margin for its cars division was at 9 percent, compared with 9.4 percent at Audi and 7.3 percent at Daimler's Mercedes-Benz division.

Daimler late last month announced the surprise resignation of Andreas Renschler, head of manufacturing at Mercedes-Benz Cars, in a move that tightens Zetsche's grip on the company because Renschler's departure removes a candidate who might have succeeded him.

The issue of succession at Daimler won't become acute until closer to 2016, when Zetsche's contract expires. (Reporting by Edward Taylor; Editing by Elaine Hardcastle)