Why Is Fiat Chrysler in a Better Position than Peers in 1Q18?



Fiat Chrysler Automobiles

In 2017, Fiat Chrysler Automobiles (FCAU) yielded impressive returns of 96.4%. The company’s consistently expanding profit margins and its efforts to improve its debt position befitted its stock last year. As of March 19, Fiat Chrysler’s stock was trading with 16.4% YTD (year-to-date) gains. These gains were far better than the 1.5% rise seen in the S&P 500 benchmark during the same period. Meanwhile, stocks of other key automakers (VCR) such as General Motors (GM) and Ford (F) have gone down 9.7% and 10.9% YTD, respectively, while Toyota (TM) has gone up 0.5%.

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Key positive factors for FCAU

In the quarter ended December 31, 2017, Fiat Chrysler’s earnings doubled to 0.70 euros (~$0.87), also beating analysts’ estimate of 0.61 euros (~$0.76). Despite slightly lower revenues, the company saw a solid increase in its net profits and an expansion in profit margins in the fourth quarter.

In 4Q17, FCAU’s revenues fell 2.3% YoY (year-over-year) to 28.9 billion euros or $35.9 billion. At the same time, its consolidated global shipments stood at 1.16 million vehicle units, nearly flat as compared to 1.15 million a year ago. Nonetheless, Fiat Chrysler’s 4Q17 adjusted EBIT margin expanded to 6.6% from just 5.2% in 4Q16. Notably, this was the seventh consecutive quarter when the company’s profit margins expanded on a YoY basis.

Last year, Jeep emerged as a key strength in Fiat Chrysler’s product lineup with rising demand for the Jeep Compass model. In the first two months of 2018, Jeep brand sales have gone up by 7% YoY in the US market, reflecting continued optimism.

Risk factors

February 2018 was the 18th month in a row when FCAU reported a YoY decline in its US sales. This was one of the reasons why Fiat Chrysler slipped from third to fourth position in 2016 according to US vehicle sales volume with a decline in its market share. In 2017, the company continued to be in the fourth position in the US market.

Despite recent improvements, Fiat Chrysler’s profit margins remain much lower than other mainstream auto giants such as Toyota and GM.


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