The emblem of Swedish truck maker Volvo is pictured on the IAA truck present in Hanover, September 22, 2016. REUTERS/Fabian Bimmer

By Niklas Pollard and Johannes Hellstrom | STOCKHOLM

STOCKHOLM Truck maker Volvo (VOLVb.ST) raised its forecast for the European market on Wednesday as years of value cuts and wholesome gross sales delivered stronger-than-expected quarterly earnings.

Sweden’s Volvo, which competes with German rivals Daimler (DAIGn.DE) and Volkswagen’s (VOWG_p.DE) steady of truck manufacturers, additionally reported a shock rise in orders for its vans, pushed by robust demand in Europe.

“This is a jackpot at all levels…a raised European outlook, better orders and better operating profit and operating margin,” Handelsbanken Capital Markets analyst Hampus Engellau mentioned following the outcomes.

Shares in Volvo rose 7.3 % by 0816 GMT (03:16 a.m. ET), reaching their highest degree since April 2015.

Volvo mentioned a overview of its development arm, seen by analysts as a possible spin-off by the group, had recognized additional potential for enchancment and the enterprise could be given extra independence throughout the group.

“To create further simplicity, transparency and flexibility, the intention is to increase Volvo CE’s structural independence within the Volvo Group,” Volvo mentioned in a press release.

Volvo mentioned its adjusted working revenue rose to five.66 billion Swedish crowns ($647 million) from 4.57 billion, this beating a imply forecast of 4.76 billion in a Reuters ballot of analysts.

Expectations that a number of years of value cuts will additional enhance profitability have helped elevate Volvo shares 46 % over the previous yr, outpacing a 14 % rise in Stockholm blue chip shares .OMXS30.

Adjusted working margin rose to six.9 % within the quarter from 5.7 % a yr earlier, beating analysts’ imply forecast of 6.2 % for the maker of vans, buses, engines and development autos.

Gothenburg-based Volvo, which sells beneath manufacturers similar to Mack, Renault, UD Trucks in addition to its personal identify, mentioned order consumption of its vans rose 10 % within the fourth quarter, in contrast with the three % decline seen by analysts.

After reaching their a publish monetary disaster excessive final yr, European truck gross sales have been extensively seen slowing in 2017 whereas North American demand, already depleted by excessive inventories and low freight charges, extends a two-year slide.

But Volvo raised its forecast for the European heavy-duty truck gross sales this yr to 300,000 autos from 280,000, implying a roughly flat market, whereas preserving unchanged its outlook for a decline in North America.

The group mentioned stock ranges within the freeway section of the North American market, its bread-and-butter enterprise there, had come all the way down to extra wholesome ranges.

($1 = eight.7547 Swedish crowns)

(Editing by Alistair Scrutton and Alexander Smith)

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