This article is the 3rd in a 6-part series examining how the drivers of value…
We are pleased to update our original research on Fiat-Chrysler Automobiles (FCA IM).
Click here to access the PDF version of our note. Summarizing our thesis briefly:
In a Nutshell: The gift that keeps on giving. When you take a company hated by investors, add the best CEO in the industry, a group of under-invested brands, a focus on ROIC and margin expansion, all at a cyclical trough in Europe, you get a powerful brew of value-creating potions. While the company committed to significant margin expansion in 2017 and 2018, we believe the company will be able to make substantial progress over the next six quarters as it reduces North American incentives, starts up new factories in Brazil and China, and most importantly, fires up its Italian factories to support the European recovery along with the new Alfa Romeo Giulia and Maserati Levante. With the IPO of Ferrari coming up in October, and subsequent spin-out of its shares to FCA holders in the summer of 2016, we make the case that FCA shares could nearly triple by the end of next year. The two most-cited concerns we hear about the company are its low North American operating margins and its indebtedness. Both concerns will be alleviated in the near term. FCA remains our most attractive and largest position.
Two-Year EBIT Walk
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