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Why Fiat Chrysler’s 2017 Earnings Trend Impressed Investors

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Jan. 2 2018, Published 11:09 a.m. ET

Fiat Chrysler’s earnings trend

In the first three quarters of fiscal 2017, Fiat Chrysler Automobiles (FCAU) delivered impressive earnings YoY (year-over-year) growth and beat the analysts’ estimates. This consistent strength in its earnings in 2017 could be one of the key reasons behind the optimism toward the company’s stock in 2017. Below, we’ll take a closer look.

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Impressive first three quarters

In 1Q17, Fiat Chrysler reported solid adjusted EPS (earnings per share) of 0.43 euros, or ~$0.47, which was ~26% higher than its EPS in the 1Q16. Its 1Q17 earnings were also higher than the analysts’ estimate of 0.42 euros, or $0.45.

Similarly, in 2Q17 and 3Q17, the company kept the optimism alive among investors by posting maintaining earnings growth. FCAU’s adjusted EPS was at 0.69 euros, or about $0.81, which was ~245% higher than its EPS in 2Q16 and higher than the analysts’ estimate of 0.54 euros, or ~$0.62.

In the third quarter, the company’s adjusted earnings were at 0.59 euros (~$0.70) per share, which was ~25% higher than 3Q16. Its earnings were also higher than analysts’ consensus estimate of 0.51 euros (~$0.60) for 3Q17.

Key positive factors

Despite the drop in the company’s revenues and shipments, its consistently rising profitability from the US and other European markets was the key reason for these positive earnings growth. The strong performance of the Ram brand and the Jeep Grand Cherokee model during the year also helped Fiat Chrysler achieve high earnings growth in the first three quarters.

Notably, the company has a bad reputation in the auto industry (XLY) for having lowest margins. Fiat Chrysler’s margins are still lower than of those of General Motors (GM), Ford Motor (F), and Toyota Motor (TM), which we’ll compare later in this series, and for this reason, improvements in FCAU’s profitability and margins are being watched closely by investors.

Continue to the next part for a look at Fiat Chrysler’s US sales in 2017.

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