FCA Profit Report Spurs Profit Upgrades.
“FCA has continued a relentless restructuring of its brand portfolio”
Fiat Chrysler Automobiles (FCA) improved net profit in the third quarter, and the overall performance of the company spurred Morgan Stanley to raise its earnings forecasts for 2018 through 2020.
FCA said net profit in the 3rd quarter rose to €910 million, up from €606 million in the same period of 2016. Adjusted earnings before interest and tax (EBIT) rose 17 per cent. Sales were down 2 per cent to €26.4 billion.
Morgan Stanley is a well-established fan of FCA in general and CEO Sergio Marchionne and Jeep in particular, and raised its forecast for 2017 earnings per share by 8 per cent, and by 2 per cent for 2018, 2019 and 2020.
Morgan Stanley also raised its target share price to €16 from €15.
“The key driver to or rising SOTP (sum of the parts) valuation is Jeep, which is on the verge of a global/export market break out following the successful changeover of Wrangler at the Toledo complex. FCA reiterated its target of 2018 Jeep volume in excess of 2 million units, which is materially higher than our 1.9 million unit forecast, on expanded capacity and continued commercial success in the Chinese market and in Latin America,” Morgan Stanley analyst Adam Jonas said.
Jonas likes FCA’s aggressive reorganisation.
“FCA has continued a relentless restructuring of its brand portfolio to de-emphasize areas where it couldn’t make money – Dodge and Chrysler branded passenger cars – while doubling down on investing in brands that benefit from secular consumer and segment trends with higher margins – Jeep, RAM (pickup trucks) and Maserati,” Jonas said.