Ford CEO starts turnaround with upbeat forecast
Results show the underlying health of company: Hackett
Ford’s new chief executive officer surprised Wall Street with better than expected earnings despite familiar challenges of a slow U.S. auto market and an aging model lineup.
In its first results since Jim Hackett became CEO in May, Ford delivered second quarter adjusted earnings per share of 56 cents, beating analyst estimates. While the carmaker boosted its annual profit forecast, it’s due to a lowerthan-expected tax rate.
“The quarter shows the underlying health of our company,” Hackett said in a statement Wednesday. “But we have opportunity to deliver even more.”
Hackett took over Ford’s top job after the board ousted his predecessor Mark Fields for not acting decisively to reverse a three-year stock slide. Credited with reviving office-furniture maker Steelcase, Hackett has a mandate to both clarify and accelerate Ford’s strategy to take on Silicon Valley in the race to driverless cars. In the meantime, the automaker is cutting costs as a dry spell in new model introductions coincides with the U.S. auto market declining for the first time in eight years.
“It’s still going to take a while to see anything in the results” from Hackett’s efforts, said David Whiston, an auto analyst with Morningstar in Chicago. “Regardless of who is CEO, they just don’t have a lot of new vehicles right now. You don’t change that in one or two quarters.”
Ford forecast full-year profit in the range of $1.65 to $1.85 per share, adjusted for some items. That’s up from about $1.58 per share projected previously, chief financial officer Bob Shanks told reporters at the company’s headquarters in Dearborn, Mich.
The improved outlook comes from an expected tax rate of 15 per cent this year, half of what the company previously anticipated. Ford lowered its rate by utilizing tax credits it had accumulated in overseas markets where it had suffered losses, Shanks said. Next year, Ford’s tax rate is likely to return to 30 per cent, he said.
A lower-than-expected tax rate helped Ford’s second quarter results.