Market Overview

Barclays Downgrades Fiat Chrysler On Unexpected North American Weakness

Share:
Barclays Downgrades Fiat Chrysler On Unexpected North American Weakness
Related FCAU
Benzinga's Bulls & Bears Of The Week: Apple, Disney, Mastercard, GE, Twitter And More
Benzinga's Top Upgrades, Downgrades For February 8, 2019
Fiat Chrysler: Doubts, Doubters And Investment Potential (Seeking Alpha)

Fiat Chrysler Automobiles NV (NYSE: FCAU) exceeded expectations with its fourth-quarter sales and profits. But weakness in China and at home discouraged Street experts.

The Analyst 

Barclays analyst Brian Johnson downgraded FCA from Overweight to Equal Weight and cut the price target from €18 ($20.40) to €15 ($17). 

The Thesis

Barclays expected challenges in Europe, China and Latin America, but had hoped that strength in North American light truck sales would offset the overseas weakness, Johnson said in a Friday note.

“What we learned on the call is that there are limits to the margin expansion in NAFTA, which led to a lower ’18 YE cash position and forecast for 2019,” the analyst said. 

Barclays attributed reduced earnings power in North America to product changeovers, overproduction of the new Jeep Wrangler, pricing pressures and rising costs, Johnson said. The latter may require a cost-reduction program not unlike the one undertaken by General Motors Company (NYSE: GM), he said. 

“While FCA maintained that its 2020 goal (set by ex-CEO Sergio Marchionne) were still achievable, they would require a 40-percent year-over-year increase in EBIT, which is a stretch — making it likely that the targets will be revised downward,” according to Barclays. 

The sell-side firm anticipates overhang from the aggressive targets for multiple quarters. 

Price Action

Fiat Chrysler shares were down 3.15 percent at $14.76 at the time of publication Friday. 

Related Links:

January Auto Sales Freeze Amid Poor Weather, Federal Shutdown

Waymo Looks To The Motor City For Autonomous Vehicle Plant

2019 Detroit Auto Show Not Its Usual Banger, But Still Pretty Revealing

Latest Ratings for FCAU

DateFirmActionFromTo
Feb 2019BarclaysDowngradesOverweightEqual-Weight
Oct 2018HSBCDowngradesBuyHold
Sep 2018Exane BNP ParibasUpgradesNeutralOutperform

View More Analyst Ratings for FCAU
View the Latest Analyst Ratings

Posted-In: automotive Barclays Brian JohnsonAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga

 

Related Articles (GM + FCAU)

View Comments and Join the Discussion!

GBP/USD Forecast: Sterling Settles In Lower 1.2900s After BoE Implied Volatility

Columbia Capitalizes On Cold Weather With Strong Q4 Earnings: The Sell-Side Reacts