Ford Profit Surges to Record as Sales of SUVs, F-150 Gainby
`They'll be printing money in North America,' analyst says
Even Europe contributes to global net income of $2.5 billion.
Ford Motor Co. reaped the benefits of Americans’ love of sport utility vehicles and pickups in the first quarter, posting record net income of $2.5 billion that exceeded analysts’ estimates on the back of those popular models.
Earnings excluding one-time costs were 68 cents a share, Ford said in a statement Thursday. That beat the 48-cent average estimate of 16 analysts surveyed by Bloomberg. Ford gained market share in North America, bolstered by sales of F-Series pickups and SUVs like the Explorer and the Flex.
“The bear thesis appears in tatters,” Ryan Brinkman, an analyst with JPMorgan Chase & Co., wrote in a note to clients, highlighting better-than-expected results from North America, international markets and the finance unit. He rates the stock the equivalent of a buy.
Ford’s string of record profits finally may have started to win over investors, who have been concerned that the U.S. auto market peaked last year at a record 17.5 million deliveries. The automaker’s shares fell 9.1 percent last year and have continued to decline -- 3.1 percent this year through Wednesday -- even as its SUV sales in the U.S. rose 16 percent in the quarter. Today the shares rose 3.3 percent to $14.11 at 12:31 p.m. New York time.
“Sustained momentum with both GM and Ford stock has been immensely difficult to achieve the past few years,” said David Whiston, an analyst at Morningstar Inc. in Chicago, who rates Ford the equivalent of a buy. “It’s unfortunate because I don’t see a recession imminent for the U.S. auto industry. They’ll be printing money in North America for quite a while. It could be several years.”
Ford posted quarterly pretax earnings of $3.8 billion, a record for any quarter, aided by an all-time high North American margin of 12.9 percent. Solid profits in Europe and growth in China also contributed. Net income doubled to 61 cents a share, from $1.15 billion, or 29 cents, a year earlier, when F-150 pickup production was limited.
The shares also rose after Chief Executive Officer Mark Fields said on call with analysts that Ford is working on a long-range electric vehicle to compete with models coming from Tesla Motors Inc. and General Motors Co. that would go 200 miles or more on a charge.
“I’ll definitely take it,” Whiston said of the rise in Ford shares. “It’s been dead money for quite a while.”
Whether these gains stick or continue remains to be seen.
“Make no mistake, this was an impressive beat,” Brian Johnson, an analyst at Barclays, wrote in a note today. “Yet while strong across the board, we’re not sure that this will do much to dissuade the bears from the ‘as good as it gets’ mantra.”
Chief Financial Officer Bob Shanks rejected Wall Street’s view that the U.S. auto market has peaked.
“I don’t buy into that,” he told reporters Thursday morning at the company’s headquarters in Dearborn, Michigan. “I know that’s what the market is pricing in; they’re also pricing in a recession. There’s nothing that we see in the leading economic indicators to suggest that anything like that is on the horizon.”
Ford tried to address negative investor sentiment last month when Shanks told analysts the automaker could withstand a 30 percent drop in U.S. auto sales and remain profitable.
- Automotive sales rose to $35.2 billion. Analysts estimated $35.7 billion on average.
- North American pretax income rose to $3.1 billion from $1.6 billion last year. The company’s U.S. sales rose 8.4 percent and its market share climbed to 15.7 percent from 15 percent a year earlier.
- Europe pretax profit was $434 million, up from a $42 million loss last year. Ford’s European sales rose 8.5 percent to 363,500 vehicles.
- In the Asia-Pacific region, pretax profit was $220 million, up from $105 million last year. Ford’s sales in China grew 14 percent to 314,454 vehicles.
Fields in the statement called it “an absolutely terrific start to the year.”
Ford won’t make as much money in the second half of the year because of rising costs to introduce redesigned Super Duty pickups and because production will be lower for scheduled factory shutdowns this summer, Shanks said. Ford also will make “some tweaks” to production in the year’s second half, he said.
“I don’t know if it’s as good as it gets,” Shanks said. “We expect the first half to be the more favorable half of the year.”