FORD PICKS UP
Strong sales boost automaker, but market remains skeptical of CEO Jim Hackett’s overall vision,
SOUTHFIELD, MICH.— Ford Motor Co. just boosted earnings the old-fashioned way — strong sales of lucrative pickups and cost cuts.
Adjusted profit for the three months ended in September exceeded the highest analyst estimate in a Bloomberg survey, as sales of FSeries pickups surged 14 per cent for the truck line’s best third quarter in a dozen years. Ford said annual earnings will be at the high end of the range it forecast earlier this year.
Chief executive officer Jim Hackett is now trying to leverage moneymakers such as the F-Series to accelerate investments in models that don’t offer an immediate payback — self-driving cars and electric vehicles. Investors remained skeptical after Hackett laid out a plan this month to improve the company’s “fitness” by slashing expenses by $14 billion (U.S.) while pushing into new forms of mobility to take on the likes of Alphabet Inc.’s driverless-car unit Waymo.
“As great as the F-Series is, you can’t run the whole company on it,” David Whiston, an auto analyst with Morningstar Inc. in Chicago, said Wednesday. “The market was clearly expecting more from investor day and they didn’t get it. And they’re still waiting.”
Demand for Ford’s bread-and-butter models helped lift net income to about $1.6 billion, up f rom $957 million a year ago, when the company was spending to launch an aluminum-bodied version of its biggest pickups.
Adjusted profit jumped to 43 cents a share in the third quarter. Earnings this year will be in the range of $1.75 to $1.85 per share, the company said, boosting the low end of its forecast.
“F Series always plays an important role for the company — that’s one of our precious franchises,” Bob Shanks, Ford’s chief financial officer, told reporters Thursday at the company’s HQ in Dearborn, Mich.
Ford shares rose as much as 2.5 per cent and were up1.2 per cent to $12.19 as of1:36 p.m. in New York. The stock had slipped 2.4 per cent through Wednesday’s close since Hackett’s Oct. 3 manifesto.
The sagging share price has stood in stark contrast to General Motors Co. (GM), whose stock closed at a record Tuesday after better-than-expected earnings. Investors are embracing GM’s plan for electric and autonomous cars while appreciating the tidy profits sport utility vehicles such as the Chevrolet Equinox are hauling in.
“Ford is definitely behind in electric vehicles and flexible mobility,” said David Kudla, chief executive officer of Mainstay Capital Management LLC, whose funds own both GM and Ford shares. “Not only is GM articulating a strategy in all of these areas, they are putting the pieces in place. With Ford, we’re still waiting to see the pieces.”
The second-largest U.S. automaker is trying to change the perception that it lags GM. Joe Hinrichs, Ford’s president of global operations, said the company is confident in its technology and strategy relative to competitors. “We need to do a better job of telling that story,” he said in an interview in Detroit this week.
Hackett, 62, offered up a couple of new details on a Thursday morning conference call. He said Ford would begin testing self-driving cars in a city next year, though he declined to specify the location or number of vehicles. The CEO said Argo AI, which is developing Ford’s autono- mous software, has reached a hiring “milestone,” but declined to say how many people it employs.
Ford is reducing production at several North American factories through the end of the year.
Sales of Ford’s passenger cars have fallen 17 per cent this year, dropping the company’s total U.S. market share to 14.9 per cent, from 15.1 per cent last year. Toyota Motor Corp. outsold Ford in the U.S. each of the last three months.
Also weighing on the stock is Hackett’s decision to pull back on a promise made by his predecessor, Mark Fields, that Ford’s profits will rebound in 2018. Hackett said this month he’ll provide guidance on 2018 earnings in January, leading to speculation they will decline as the automaker spends on new technology.
“It’s likely you’ll have to wait quite a while to get any meaningful upside to the stock,” Whiston said.