Renault beats FY16 estimates, issues upbeat FY17 outlook
On February 10th , French automaker Renault S A (OTC: RNLSY) reported fiscal 2016 operating profit and revenue that jumped past analysts’ estimates. The company also boasted record volumes for the full year 2016.
The market rewarded the overwhelmingly positive results by pushing the share price to a high of $19.16, which is less than $2 away from the 12-month high of $20.52.
Considering the operational improvements and optimistic mid-term goals of the company detailed below, we forecast the stock of Renault to remain bullish in the weeks ahead.
The Boulogne, Billancourt-based company reported fiscal 2016 revenues of €51.24 billion, up 13.1% from €45.33 billion in fiscal 2015. For the year ended December 2016, Renault reported operating profit of €3.282 billion, up from €2.38 billion last year. The fiscal 2016 results exceeded Thomson Reuters’ earnings estimates of €3.07 billion on revenues of €50.84 billion. The operating profit margin increased 1.2% y-o-y to 6.4% in fiscal 2016.
On a per share basis, the fiscal 2016 earnings increased 2.22% to €12.57, from €10.35 per share in fiscal 2015. During FY16, the company recorded sales of 3.18 million vehicles, compared with 2.81 million vehicles last year. It is the fourth consecutive year of growth in volumes. The devaluation of the British Pound and Argentinian Peso had a negative impact of €702 million on the performance of the company. This was partially offset by a €331 million gain from the lower cost of raw materials.
To the overall profit, Nissan contributed €1.74 billion in fiscal 2016, versus €1.98 billion in the prior year. Avtovaz, the Renault-Nissan alliance in Russia, made a negative contribution of €89 million in 2016. However, it was far better than a negative contribution of €620 million in 2015.
The company anticipates to record revenue growth of between 1.5% and 2% in 2017. Renault expects the European and French markets to record revenue growth of 2%. Renault also expects China (+5%) and India (+8%) to maintain their momentum.
The company is also preparing a new strategic plan (2017-2022) to increase the revenue to €70 billion and profit margin to 7% at the end of the term. Thus, considering the strong fiscal 2016 results and growth initiatives taken by the company, we anticipate the stock to remain bullish in the short-term.
The impressive FY16 results enabled the stock to break above the resistance level of 18. The ascending MACD histogram and positive reading of the Chaikin money flow indicator indicates that the rally is not yet over in the stock.
So, a binary trader can invest in a call option or its equivalent through the platform of any reputed broker to benefit from the predicted decline of the stock of Renault. A bet on the call option should be made when the stock trades near $18.50. By selecting March 1st as the contract expiry date, a trader can look forward to end the trade in the money.
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