UPDATE 2-Fiat beats Q2 expectations, confirms 2008 targets

(Recasts lead, ceo quotes, details, background, share price)

By Gilles Castonguay

MILAN, July 23 (Reuters) - Italian car maker Fiat SpA (FIA.MI) posted record quarterly results and confirmed its targets for this year and 2009 on Wednesday, sending its stock on a record rise.

Shares in the maker of Alfa Romeo, Lancia and Fiat cars soared 13.71 percent to a one-month high in heavy volume, ending at 11.86 euros.

"The quarterly results were -- without a doubt -- higher than expected," said one trader. "The reaction was excessive, a sign that previous selling (in the stock) had been exaggerated."

The rise in the stock was the biggest one day jump since Sept. 28, 2001, when the stock leapt 11.62 percent, according to Milan's exchange.

The cost of insuring Fiat's debt against a default also improved with five-year credit default swaps falling to 235 basis points from 250 basis points, according to another trader.

Given the fall in sales and the rise in costs hitting the sector this year, analysts were sceptical that Fiat and PSA Peugeot-Citroen (PEUP.PA) and Volkswagen (VOWG.DE) -- which also reported results on Wednesday -- would be able to keep their targets.

Fiat has been cutting costs and expanding in emerging markets like Brazil to offset the difficulties in Europe. One initiative has been to idle plants in Italy temporarily.

Although he acknowledged the challenge in meeting the targets, Chief Executive Sergio Marchionne expressed confidence on a conference call with analysts.

"I'm 56 and I've never had to change a forecast so far -- and I prefer not to have Fiat do it (for) the first time," he said.

CONFIRMS TARGETS

Fiat confirmed targets for 2008 including a trading profit of 3.4 billion-3.6 billion euros.

For 2009, it stuck to a forecast of about 65 billion euros in revenues and 4.3 billion-4.5 billion euros in trading profit.

The targets are based on a strong Latin American market and a resilience in price. It also relies on demand for agricultural commodities helping its farm equipment maker CNH Global NV (CNH.N), a maximum decline of 3 percent in Europe's car market and a flat market for Iveco trucks.

In the second quarter, Fiat's trading profit rose 19.6 percent to 1.131 billion euros ($1.78 billion) with revenues up nearly 12 percent to 17 billion euros. Both figures are records. At its key car business, the success of new models like the Cinquecento (500) and a strong performance in Brazil led to revenues rising 14.6 percent to 7.8 billion euros and trading profit going up 25.9 percent to 243 million euros.

Truck maker Iveco posted a 10.7 percent rise in trading profit at 248 million euros. Sales in eastern Europe and Latin America helped compensate for a decline in western Europe.

CNH also produced strong results. [nBNG257045].

Trading profit is operating profit before extraordinary items like restructuring costs.

Fiat said it had 4.7 billion euros in liquidity, about 1.1 billion euros in cash flow and 500 million euros in debt.

It also sees 1 billion euros in cash generation this year.

(Additional reporting by Gabriella Bruschi and Massimo Gaia) (Reporting by Gilles Castonguay, editing by Elaine Hardcastle)