Why Did Fiat Chrysler (FCAU) Stock Surge Today?

Shares of Fiat Chrysler (NYSE:FCAU) were up more than 6% through early afternoon trading Wednesday after reports suggested that outgoing CEO Sergio Marchionne has big plans for the company set to be released at a strategy meeting later this week.

According to people familiar with the matter cited by Bloomberg, Marchionne’s departing strategy includes betting the automaker’s future on Jeep brand SUVs and luxury Maserati vehicles—while also downsizing its namesake brands.

Bloomberg’s report indicated that FCAU is considering discontinuing the sale of Fiat cars in North America and China within the next few years and confining Chrysler sales to mostly the United States. Marchionne, who is expected to retire in 2019, will officially unveil the plan on Friday.

Analysts at HSBC in London said the strategy meeting “will be the last major event for Sergio Marchionne as CEO and a potential catalyst for a rerating” of FCAU. The successor to Marchionne will be announced at the company’s next shareholder meeting in early 2019.

Bloomberg also suggested that Fiat Chrysler is considering combing Alfa Romeo and Maserati into a single unit when it reports financial results, which might be interpreted as a first step toward a spinoff of the luxury Italian brands.

Overall, Marchionne’s plan appears to shift Fiat Chrysler’s focus towards niche trends in favor of competing directly with mass-market car giants like Volkswagen (OTC:VLKAY) and Toyota (NYSE:TM) . Marchionne has reportedly expressed concern that mainstream automobiles will become “commoditized” in current market conditions.

Investor reactions to the early reports have clearly been favorable, with FCAU shares leaping nearly 7% to an intraday high of $22.38. The stock is now up roughly 100% over the past year, underscoring its top- and bottom-line growth prospects and improving analyst outlook.

The Zacks Consensus Estimate for FCAU’s full-year earnings has added five cents in the past two months, with EPS projections for the following year surging 18 cents in that same time. Fiat Chrysler is now expected to see earnings growth of about 44.5% and revenue growth of 10.9% in fiscal 2018.

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