Winning Stock Forecast: Fiat Chrysler Automobiles (NYSE: FCAU) Drives Up Returns by Whopping 106.63% in 1-Year

Winning Stock Forecast: Fiat Chrysler Automobiles (NYSE: FCAU) Drives Up Returns by Whopping 106.63% in 1-Year

[Source: Wikimedia Commons, May 29, 2018]

“You will need to be open and flexible in order to embrace [world] change. The winds of change will blow you off course if you are not anchored by a core set of values.”

— Sergio Marchionne, Chairman & CEO of Fiat Chrysler Automobiles, the Chairman and CEO of Ferrari and also Chairman of Maserati.

Fiat Chrysler Profit Surges on Strong Sales of Jeeps, Pickups

During the past year, Fiat Chrysler Automobile’s stock jumped 106.63% outperforming the market by over 95%. Fiat Chrysler Automobiles publicized its first-quarter profit rose 60% on strong sales of its most profitable vehicles, keeping its margins above rival Ford Motor Co. The Italian-American auto maker said it was on track to meet its growth targets for the year, including a pledge to pay off what remains of its net industrial debt. That would mark Fiat Chrysler’s full recovery after Chrysler’s bankruptcy a decade ago and a validation of the merger with Fiat.  Chief Executive Sergio Marchionne said on a conference call with analysts that “over all, the indications are that the business is in good shape.” Fiat Chrysler’s first-quarter profit rose to €1.02 billion ($1.24 billion), even as revenue fell 2% to €27 billion. The company said its adjusted operating profit, which excludes one-time items, grew 5% to €1.6 billion, which brokerage Evercore ISI said was below a consensus forecast of €1.8 billion among financial analysts.

However, this comes right after Fiat Chrysler announced one of the biggest recalls in the automotive industry: Fiat Chrysler recalled 4.8 million vehicles, warning the owners of their automobiles to stop using the cruise control immediately. The reason: a potential defect could leave the driver unable to cancel cruise control during certain circumstances, and drivers are recommended not use cruise control until the vehicles have been inspected. This announcement arrived as many drivers were hitting the roads for the long Memorial Day holiday weekend. Thus, in premarket trading Friday, Fiat Chrysler shares fell about 2.5 percent.

[Source: Yahoo Finance, May 22, 2018]

The auto maker said the biggest earnings drivers were higher net pricing and increased sales of high-profit margin vehicles, particularly new versions of its Jeep Wrangler SUV and Ram 1500 pickup truck. Fiat Chrysler’s global margin for the quarter was 6%, up from 5.5% a year earlier and above Ford’s 5.2% margin. General Motors Co.’s margin was 7.2%. Mr. Marchionne, who plans to step down in early 2019, said he expects Fiat Chrysler will pay off its debt and move to a cash-positive position this year. The company is planning to announce a new set of growth targets in June, but won’t name Mr. Marchionne’s successor until next year.

The CEO said he was disappointed with a slow ramp-up in production of the new Ram truck and Jeep Wrangler. Higher-than-expected launch costs for those two core vehicles dragged down profit in North America, the company’s largest market. Fiat Chrysler’s operating profit in North America adjusted for one-time items fell 2% to €1.21 billion, with launch costs alone hitting €300 million in the quarter. Marchionne characterized those costs as one-time occurrences and said the production difficulties were a temporary setback. The company’s stock price, which has more than doubled over the past year, was little changed on the New York Stock Exchange on Thursday.

Fiat Chrysler first set 2018 targets four years ago, then raised them in 2016. They currently call for revenue of €136 billion, adjusted net profit of between €4.7 billion and €5.5 billion, and net industrial cash of at least €4 billion. Mr. Marchionne has said little about the new business plan through 2022 due out this summer, but told analysts that rebuilding Fiat Chrysler’s businesses in China and Europe will be a priority. Calling Europe the auto maker’s “biggest challenge,” the CEO said that region would be “the single largest driver of the financial repositioning” over the next four years. First-quarter profit and revenue in Europe were unchanged from a year before, but the company’s sales volumes fell 2% on the year to 390,000 vehicles.

Among the biggest issues Fiat Chrysler faces in Europe are financial penalties if it fails to meet tougher emissions regulations—fines that Mr. Marchionne said “need to be avoided like the Black Plague.” In China, the world’s largest car market, Fiat Chrysler’s market share fell below 1% in the latest quarter. Mr. Marchionne blamed poor marketing and a misunderstanding of what local buyers want from the Jeep brand. “We overestimated the value of the American DNA to the Chinese market,” he said. The centerpiece of the company’s rebuilding effort in China is a new midsize SUV called Jeep Commander built specifically for the local market. That vehicle will be a “litmus test” for the brand’s success, Mr. Marchionne said.

On Thursday, Fiat Chrysler confirmed its full-year forecast for net revenue of €125 billion, adjusted net profit of €5 billion and net industrial cash of €4 billion. It said net industrial debt on March 31 stood at €1.31 billion.

[Source: Bloomberg, May 29th, 2018]

Fiat Chrysler Expected to Tell Investors What Its Future Looks Like Without CEO Marchionne

Fiat Chrysler surprised Wall Street by largely delivering on income goals for this year, outlined in its last strategic plan, which dates back to 2014 and were triple what some analysts projected. The company’s stock price has quadrupled since then and its healthy 6% profit margin is higher than crosstown rival Ford Motor Co.’s margin and approaching General Motors Co.’s 7.2%.

Industry officials expect the new strategy through 2022—its third such plan since 2009—to be similarly aggressive. Morgan Stanley estimates Fiat Chrysler could aim to more than double operating earnings and hit profit margins as high as 13%. “We expect that FCA’s [operating] margin targets could rival or even exceed what many premium peers are achieving today,” the brokerage said in an April report.

Over the next five years, Fiat Chrysler may move to embrace electrified engines and play catch-up in self-driving car capabilities, a shift after Mr. Marchionne for years expressed harsh skepticism about the business case for both technologies. The company ranks among the lowest of all major auto makers globally in its progress toward making money on self-driving car technology, UBS said in a recent report.But the company has signaled its intent to start offering a wider array of gas-electric hybrids and fully electric vehicles and it has quietly built up a team of autonomous car experts in recent months, according to people familiar with the company’s strategy.

Analyst Recommendations:

According to analyst recommendations from Yahoo Finance, the current consensus is a “Buy” in FCAU Stock, with 1 advising a “Strong Buy”, 2 advising a “Buy” and 1 advising a “Underperform”.

I Know First’s Algorithm Success With FCAU Stock:

On May 25th 2017, I Know First algorithm issued a bullish 1-year forecast for Fiat Chrysler Automobiles N.V. (NYSE: FCAU). The forecast illustrated a signal  of 56.11 and a predictability of 0.67.  In accordance with this bullish forecast, FCAU stock returned 106.63% over this period, highlighting the accuracy of the prediction produced by the I Know First algorithm.

Current I Know First subscribers received this bullish FCAU forecast on May 25th 2017. 

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About Fiat Chrysler Automobiles N.V. (NYSE: FCAU),

Fiat Chrysler Automobiles N.V. (NYSE: FCAU), incorporated on April 1, 2014, is an international automotive group. The Company is engaged in designing, engineering, manufacturing, distributing and selling vehicles, components and production systems. The Company’s segments include regional mass-market vehicle segments, which include NAFTA (The North American Free Trade Agreement), LATAM (Latin America), APAC (Asia-Pacific) and EMEA (Europe, the Middle East and Africa), Maserati, its luxury brand segment, and a global components segment. The Company manufactures and sells passenger cars, light trucks and light commercial vehicles. As of December 31, 2016, the Company had 162 manufacturing facilities, and 87 research and development centers. The Company has operations in approximately 40 countries and sold its vehicles directly or through distributors and dealers in over 140 countries.

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