Ford's Profit Falls 35%--3rd Update
April 27 2017 - 11:55AM
Dow Jones News
By Adrienne Roberts and Christina Rogers
Ford Motor Co.'s first-quarter net income fell 35% over the same
year-ago period on higher costs and weaker U.S. sales, but results
beat Wall Street expectations, sending the stock price up 1.5% in
midmorning trading.
The No. 2 U.S. auto maker on Thursday reported $1.6 billion in
net profit for the three-month period, down from $2.5 billion in
the first-quarter of 2016, when strong demand for a newly
redesigned F-150 pickup truck helped Ford post its best quarterly
operating profit in history.
Adjusted earnings per share were 39 cents in the first quarter,
beating analysts' consensus of 36 cents a share. Analysts
attributed the beat to stronger-than-expected earnings in North
America and at Ford Credit, the company's financing arm.
"The results were solid but it was a tough comparison" to last
year's first-quarter results, Ford Chief Financial Officer Bob
Shanks said on Thursday.
The Dearborn, Mich., auto maker faced headwinds at home and
abroad with lower sales in China, an unfavorable exchange-rate
impact in Europe due to Brexit and a tougher market in the U.S.,
where new-car demand is cooling after seven years of uninterrupted
growth.
Mr. Shanks described the just-ended quarter as Ford's "toughest"
this year and expects results to be flat "in aggregate" over the
remaining three quarters.
Revenue for the first-quarter increased by 4% to $39.1 billion,
driven by a favorable mix of more profitable pickups trucks and
SUVs.
Ford is coming off one of its most profitable periods in history
with its North American business benefiting from two years of
record sales growth in the U.S. auto industry and surging demand
for its highly lucrative trucks and SUVs amid low gasoline
prices.
Ford earned a historically high $10.4 billion in operating
profits last year but results were down slightly from 2015's record
of $10.8 billion.
Company executives are forecasting leaner profits this year,
confirming full-year operating guidance on Thursday of $9 billion
for 2017.
Ford plans to cut $3 billion in costs this year and expects
profits to rebound in 2018, driven by continued strengthen in the
U.S. pickup truck market, the roll out of two new full-size SUVs
and improving results at Ford Credit.
Ford's first-quarter adjusted pretax profits were down 42% to
$2.2 billion, dinged by a $295 million recall expense disclosed in
March covering nearly a half-million vehicles with fire risks and
faulty door latches. This was the second time in less than a year
that safety concerns have hurt the bottom line.
Operating profits for Ford's North American operations were $2
billion in the first-quarter, down 35% compared with the same
period a year ago.
Margins also slipped in the first-quarter to 8.3% in the
company's core North American business, from a lofty 12.9% a year
ago. While transaction prices were up $1,971 per vehicle on strong
demand for Ford's heavy-duty trucks, U.S. sales fell 4% in the
first quarter and market share was down.
Higher interest rates and a steady decline in used-car values
are also hurting vehicle affordability among U.S. consumers and
making it more difficult for auto makers to continue offering the
cheap leases that helped drive the recent U.S. sales boom.
In Europe, Ford posted a pretax profit of $176 million compared
with $434 million in the same year-ago period, with exchange-rate
and Brexit headwinds offsetting higher sales volumes.
In Asia Pacific, Ford recorded a $124 million operating profit,
down from $220 million a year ago, as the auto maker continued to
struggle with cooling new-car demand and the expiration of a tax
subsidy on small-engine vehicles last year.
Ford's operating loss in South America continued, with the auto
maker reporting $244 million in red ink for the just-ended quarter,
compared with $256 in the same year-ago period.
Write to Adrienne Roberts at Adrienne.Roberts@wsj.com and
Christina Rogers at christina.rogers@wsj.com
(END) Dow Jones Newswires
April 27, 2017 11:40 ET (15:40 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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