FCA Shares Dive Then Rally After First Quarter Profit Falls.
“In the longer term, there’s the hope that someone will buy (it)? Perhaps, but there’s only one buyer PSA and it doesn’t seem to be offering what FCA wants”
Fiat Chrysler Automobiles (FCA) shares fell sharply after it announced first quarter profits failed to meet expectations, but recovered the losses and powered ahead into the plus column after the company later said it would meet its 2019 profit target.
FCA shares fell 2.8% on the Milan Stock Market after news first quarter adjusted earnings before interest and tax (EBIT) fell 29% from the same period last year to 1.07 billion euros ($1.2 billion). Analysts had expected EBIT of 1.31 billion euros ($1.46 billion).
But FCA later said sales of new U.S. pickup trucks like the Jeep Gladiator and RAM models would help propel EBIT to its 2019 profit target of more than 6.7 billion euros ($7.5 billion), and the shares closed up more than 5% at 14.27 euros.
FCA’s luxury brand Maserati was in trouble in the quarter, with operating profits down 87%, hurt by weakness in China, but FCA CEO Mike Manley said this should improve in the second half of the year.
FCA has talked about its willingness to seek partnerships with other global manufacturers, and Manley said the next two to three years would yield what he called “significant opportunities”.
Earlier this year PSA Group of France was said to be interested in buying FCA, while its compatriot Renault was reportedly eager to do a deal.
Bernstein Research analysts Max Warburton wondered if PSA was really interested in buying FCA.
“Europe is losing money. NAFTA margins are falling despite strong U.S. sales and strong products. (FCA) needs heavy spending, which is crimping free cash flow. FCA promises a stronger H2, but it won’t be easy,” Warburton said.
“In the short term, an H2 improvement in NAFTA margins on the back of production problems being solved and some highly profitable Jeeps? Yes, that’s possible. In the medium term, there’s the hope that management can improve Europe and Maserati? Maybe, but it looks very difficult. In the longer term, there’s the hope that someone will buy (it)? Perhaps, but there’s only one buyer PSA and it doesn’t seem to be offering what FCA wants,” he said.