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Jeep's New Pickup Helps Fiat Chrysler Climb to an Earnings Beat

John Rosevear, The Motley Fool

Fiat Chrysler Automobiles (NYSE: FCAU) said that record North America results helped it deliver second-quarter 2019 results that exceeded Wall Street expectations and put it on course to deliver on its previous full-year guidance. 

FCA's shares rose over 4% in early trading after the news was released. Here's a look at where FCA stands with the first half of 2019 in the books, and at what's likely in store as the year continues.

A red 2020 Jeep Gladiator Rubicon, a Jeep-Wrangler-based pickup, on a mountain road

Given FCA's success with Jeeps and pickups, you'd expect a Jeep pickup to do very well -- and it has. Image source: Fiat Chrysler Automobiles.

FCA's results: The raw numbers

All of the financial results below are shown in euros. (FCA is incorporated in the Netherlands and is thus obliged to report its financial results in euros.) As of July 31, 1 euro = $1.12.

Metric Q2 2019 Change vs. Q2 2018
Revenue 26.7 billion  (3%)
Vehicles shipped 1,157,000 (11%)
Adjusted EBIT (earnings before interest and tax) 1.527 billion  (0.5%)
Adjusted EBIT margin 5.7% 0.1 pp higher
Net income 793 million 14.3%
Industrial free cash flow 754 million (50%)

Data source: Fiat Chrysler Automobiles. FCA's expression of "adjusted EBIT" excludes one-time items from the standard calculations. Vehicles shipped include totals from FCA's joint ventures with Chinese automakers and are rounded to the nearest thousand. "Industrial" figures include results from FCA's core automotive business only; results from the company's financial-services subsidiary are excluded. pp = percentage points.

What happened with Fiat Chrysler Automobiles this quarter?

  • North America was the big positive story for FCA in the second quarter. While shipments were down 12% as dealers worked to reduce inventories, revenue was flat (thanks to an improved mix -- more new Ram and Jeep Gladiator pickups), and adjusted EBIT rose 12% to 1.57 billion euros. 
  • FCA's adjusted-EBIT margin in North America, a widely watched number, was 8.9%, up 0.9 percentage points from the second quarter of 2018.
  • Shipments in Europe fell 10% after FCA discontinued two small Alfa Romeo and Fiat models in a bid to boost profitability in the region. Revenue fell 12%, and adjusted EBIT -- hurt by adverse exchange-rate effects as well as the lower shipments -- fell to just 22 million euros from 188 million euros a year ago.
  • FCA posted another profit in Latin America, where rivals like Ford Motor Company have struggled with big losses for the last several quarters. FCA's adjusted EBIT of 110 million euros was up slightly from a year ago as cost reductions and price increases successfully offset local inflation and exchange-rate pressures.
  • FCA's adjusted-EBIT loss of 12 million euros in its Asia Pacifica Australia China region was a significant improvement from a year ago. Revenue in the region rose 17% despite a significant (34%) drop in combined shipments. ("Combined" shipments include those from FCA's joint ventures with Chinese automakers.) FCA credited the gain to higher sales of imported Jeep Wranglers and success in reducing local costs. 
  • FCA's luxury Maserati brand continued to struggle in the second quarter. Global shipments fell 46% as dealers worked to reduce inventories, revenue fell 40%, and adjusted EBIT swung to a 119-million-euro loss from a 2-million-euro profit in the year-ago period. 

The upshot: Overall adjusted EBIT of 1.52 million euros was roughly flat from a year ago, but it was well ahead of the 1.43-billion-euro Wall Street consensus estimate as reported by Thomson Reuters. 

Special items, debt, and liquidity

FCA took one-time charges totaling 157 million euros in the second quarter, mostly impairment charges related to product-line changes in North America and at Maserati. 

As of June 30, FCA had 15.8 billion euros in cash and equivalents, plus untapped credit lines of 7.7 billion euros, for total liquidity of 23.5 billion euros. Against that, it had total long-term debt of 14.7 billion euros, of which 6.8 billion euros will be due by the end of 2020. 

Looking ahead

FCA once again reiterated the mostly upbeat full-year guidance it gave in January. For 2019, it still expects:

  • Adjusted EBIT greater than the 6.7 million euros it generated in 2018.
  • An adjusted-EBIT margin better than 6.1%, its 2018 result.
  • Adjusted diluted EPS greater than 2.70 euros (2018 result: 3.00 euros).
  • Industrial free cash flow of greater than 1.5 billion euros (2018 result: 4.4 billion euros). 

On balance, this was a good quarter for FCA and a sign that CEO Mike Manley has the company headed in the right direction. While Maserati's struggles remain a concern, and the ongoing effort to revamp Europe has yet to bear fruit, FCA appears to be navigating difficult conditions in China and Latin America better than many of its rivals. Meanwhile, it's making very good money in North America on strong sales of Jeeps, pickups, and -- unsurprisingly -- its all-new Jeep pickup. 

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John Rosevear owns shares of Ford. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.