Ford earnings rise on strength of F-150 Pickups; Cash reserves grow


Detroit Free Press

Published 7:15 a.m. ET Oct. 26, 2017 | Updated 7:29 a.m. ET Oct. 26, 2017

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Ford announced Thursday a third quarter profit of $1.6 billion, which reflects a 63% increase from one year ago.

On a per share basis, the Dearborn automaker earned of 39 cents per share, beating the 33 cents per share average, based on in a FactSet survey of Wall Street analysts. That’s up from 26 cents per share a year earlier.

Revenue from sales in North America, especially trucks and SUVs, drove the better-than-expected results under the leadership of CEO Jim Hackett, a former office furniture executive who took the helm of Ford in May.

The company is seeing higher profits generated by its F-Series pickups in the U.S., Canada and Mexico. The average F-Series truck sold for $2,300 more than a year ago, or $45,400 in September. Ford is seeing strong demand for the most expensive packages — Lariat, King Ranch, Platinum – in the Super Duty trucks — and the Raptor performance version.

Ford’s revenue worldwide increased 1% to $36.5 billion during the third quarter and its pre-tax profit jumped 40% to $2 billion.

In what analysts are calling a high-profile “second date” with Wall Street investors, CEO Hackett reported Thursday an enormous pile of cash on hand and bigger profits on the nation’s most popular pickup truck.

“This quarter demonstrates that our team’s focus on fitness is showing early promise. But we also know that we must accelerate that progress in the near term, while taking the necessary steps to fundamentally redesign our business operations to be more fit for the long term,” Hackett said.

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CFO Bob Shanks said in his morning analysis, “It was a solid quarter, a good quarter. We’ve seen profitability in growth, profitability and cash flow.”

Ford said North America continues to generate most of the profit, posting earnings before taxes of $1.7 billion, up about $400 million, or 33%, over the same period last year. Elsewhere the company posted a pre-tax loss of $86 million in Europe and a profit of $289 million in the Asia Pacific region. That’s up from $131 million a year ago.

Results in South America were a loss of $158 million and a loss of $60 million in the Middle East and Africa.

Ford has faced a series of challenges this year, including shortages its top-selling new Fiesta in Europe, carbon-monoxide issues involving police vehicles, recalls and a CEO facing Wall Street analysts hungry for specifics related to cost-cutting and strategies related to autonomous vehicle technology and ride-sharing.

Wall Street has failed to reward Ford this year as much as its rivals General Motors and FiatChrysler.  But over the past three months, Ford and Tesla stock grew 5%, while GM stock jumped 26% largely because of its perceived leadership in driverless cars and shared mobility. For overall perspective the S&P 500 gained 4%.Jessica Caldwell, an analyst with Edmunds.com, said Ford leasing has accounted for a growing portion of Ford sales. Some buyers are shifting to leases so they can afford the monthly payments on the Super Duty trucks. 

At the start of this month, Hackett said Ford planned to cut material costs by $10 billion and engineering expenses by $4 billion over five years, shift $7 billion of capital costs from cars to SUVs and trucks, embrace partnerships such as its recently announced alliance with India’s Mahindra Group, and deliver 13 new electric vehicle models in the next five years.

“This is the second earnings report we’re seeing under Jim Hackett. Investors want to see results right way,” said Rebecca Lindland, executive analyst at Cox Automotive.  

Analysts throughout the industry question the status of the luxury Lincoln brand, which generates less than 5% of Ford’s U.S. sales.  

“Ford, in some capacity, is handicapped by the fact that it has only Ford and Lincoln  while other car companies have many more brands,” Lindland said. “Ford has got to get to work on making Lincoln relevant, both here and in China.”

A unique strength for Ford, she added, is that its buyers are among the most “domestically partisan” owners in the world, with some 90% identifying as loyal to American brands. 

Contact Phoebe Wall Howard: phoward@freepress.com or 313-222-6512.

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