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Why Fiat Chrysler Surged despite Its Q2 Earnings Miss

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Fiat Chrysler Automobiles (FCAU) released its second-quarter earnings results today before the US market opened. During the quarter, the company’s adjusted EPS stood at 0.59 euros, slightly lower than analysts’ estimate of 0.61 euros, according to the data compiled by Reuters. Its adjusted EPS fell 1.4% from 0.62 euros in the second quarter of 2018.

Fiat Chrysler stock jumped

Despite Fiat’s missing analysts’ consensus earnings estimate, investors reacted positively to its second-quarter earnings. Its stock jumped by over 4.7% on the NYSE this morning. The company’s solid North American performance, improved pickup truck sales, and rising profitability could be some of the reasons for investors’ positive reaction. During its second-quarter earnings event, FCAU’s management also confirmed its 2019 guidance, which added optimism.

In contrast, the shares of other mainstream automakers General Motors (GM), Ford Motor Company (F), Toyota Motor, and Honda Motor Company were down 0.6%, 0.2%, 1.1%, and 1.0%, respectively, on the day. Electric car maker Tesla (TSLA), which released its second-quarter results last week, was up 0.7%.

Second-quarter shipments and revenue

In the second quarter, Fiat Chrysler’s combined shipments fell about 11% YoY (year-over-year) to 1.16 million vehicle units. This shipment drop resulted in a revenue fall of nearly 3% YoY to 26.7 billion euros. Dealer stock reductions, a positive product mix, and currency tailwinds helped the company boost its revenue in the quarter.

On a positive note, the company reported nearly flat revenue despite a sharp 12% fall in its shipments in its North America segment. High demand for the company’s Ram pickup trucks and Jeep SUVs were the key factors that offset the negative impact of its shipment decline.

FCAU’s EBIT margin expanded

Fiat Chrysler reported a 5.7% adjusted EBIT margin in the second quarter, slightly higher than 5.6% a year ago. The company’s adjusted net profit also increased nearly 2% YoY in the quarter to 928 million euros.

Fiat Chrysler has managed to improve its profitability significantly in the last few years. Its efforts to improve manufacturing efficiencies and its increased focus on trucks and SUVs have been helpful in this regard.

At a time when US car sales are falling, other auto companies GM, Ford, Toyota, and Honda are also trying to improve their manufacturing efficiencies to save on costs.

Auto industry’s second-quarter earnings season

General Motors is scheduled to release its second-quarter results on Thursday. Wall Street analysts expect the company to post a 2.1% fall in its revenue, and they expect its adjusted EPS to fall about 20.7% YoY.

Ford, GM’s direct peer and the second-largest US auto company, released its second-quarter earnings results on July 24. Ford missed analysts’ earnings expectation by a narrow margin and reported a 1.6% YoY fall in its adjusted second-quarter earnings. As a result, Ford stock is down 6.2% in July.

Tesla also reported its second-quarter earnings on July 24. The release triggered a massive sell-off in its stock the next day. On July 25, Tesla stock tanked 13.6% after it reported adjusted EPS of $1.12 in the second quarter. Nonetheless, record growth in its car deliveries helped the company to report a 65.8% YoY rise in its revenue. Tesla’s recent announcement of its Megapack batteries has helped its stock recover. It’s risen 5.5% in July.

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