How Jeep Keeps Saving Fiat Chrysler’s Profits

Fiat Chrysler Automobiles N.V. (NYSE: FCAU) reported-second quarter 2016 results before markets opened Wednesday. The automaker posted adjusted diluted earnings per share (EPS) of €0.448 ($0.49) on revenues of €27.89 billion ($30.69 billion). In the same period a year ago, the company reported EPS of €0.243 on revenues of $28.54 billion. Second-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.50 and $31.77 billion in revenues.

The company’s Jeep brand continues to lead Fiat Chrysler sales. Through the first half of 2016 the company has sold 83,691 Jeep units in the United States, a jump of 17% year over year, while sales of the Ram pickup brand is up 11.3% and Dodge brand sales are up 5.7%. Chrysler brand sales are down 19.3% year over year.

Jeep’s European sales rose 24.5% in the first half of the year to 53,555 units. The company’s Fiat brand, which is a dud in the United States, got a sales bump of nearly 18% in Europe to more than 414,000 units. Overall sales in Asia are down 50% year over year to just 23,000 units for the quarter.

Operating profit for the second quarter rose 16% to €1.63 billion, not including €414 million in recall charges related to Takata airbag inflator recalls and €105 million in costs related to renovating some manufacturing to produce more pickup trucks and sport utility vehicles (SUVs).

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Fiat Chrysler raised its full-year revenue guidance from €110 billion to more than €112 billion ($121 billion) and adjusted net profit from around €1.9 billion to more than €2 billion. The company also confirmed that net industrial debt will fall below €5 billion this year.

The consensus analysts’ estimate for third-quarter EPS is $0.50 on revenues of $31.77 billion. For the full year, the consensus estimates call for $1.55 in EPS and revenues of $124.23 billion.

Fiat Chrysler’s shares traded down about 2.6% late Wednesday morning to $6.82, after closing at $7.00 on Tuesday, in a 52-week range of $5.45 to $16.62. The consensus price target on the shares was $9.02 before the earnings report.

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