FRANKFURT (Reuters) -- Daimler today reported a 29 percent jump in quarterly core earnings at Mercedes-Benz Cars, surprising investors wary of an economic slowdown.

Earnings before interest and tax (EBIT) from ongoing business at Mercedes-Benz Cars, which includes the Smart brand, rose to 1.61 billion euros ($2.04 billion) in the third quarter from 1.25 billion euros in the year-earlier period, Daimler said in an ad-hoc statement .

"The results are significantly better than expected,” said Frank Biller, a Stuttgart-based analyst with LBBW. “This shows that fears of a profit warning that weighed on the stock over the last weeks were unfounded."

Daimler  is due to publish full quarterly financial results on Oct. 23.

The company said it was sticking with its 2014 forecasts for its divisions, which also include Daimler Trucks, where quarterly core earnings rose 17 percent to 618 million euros.

Daimler said it would review its guidance for 2014 industrial free cash flow, a major factor when it comes to funding dividends, after the figure jumped in the third quarter.

The group has so far said it expects full-year industrial free cash flow, adjusted for acquisitions and disposals, to decline significantly from the 3.2 billion euros posted in 2013.

In the third quarter adjusted industrial free cash flow rose to about 2.9 billion euros from 1.6 billion in the year-earlier period.

Mercedes posted its best-ever quarterly vehicle sales in the third quarter through September with volume rising 12 percent to just over 412,000 vehicles, thanks to the release of new models and surging demand in China.

Bloomberg contributed to this report

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