Ford profits surge on sales of F-150 trucks
Ford Motor Co. posted a 44-per-cent surge in secondquarter profit, exceeding analysts’ estimates thanks to consumers paying big money for new models including fully loaded versions of the new aluminum-bodied F-150 pickup.
Ford reported net income of US$1.9 billion, or US47 cents a share, compared with US$1.3 billion, or US32 cents a year earlier. Profit beat the 37-cent average estimate of 17 analysts surveyed by Bloomberg.
The results ease pressure on Ford for the second half. Chief executive Mark Fields has pledged pre-tax profit will grow by as much as 51 per cent this year as Ford resumes full production of the F-150, its top selling model. Ford had record profits in North America, with an operating margin of 11.1 per cent, even as it sold fewer of its pricey pickups.
“This is a great quarter that demonstrates that there’s more to Ford and more to North America than the F-150,” Bob Shanks, the automaker’s chief financial officer, said Tuesday on Bloomberg TV. “We’re excited about what’s ahead for us with the F-150.”
Ford has said it will be the end of September before dealers are fully stocked with FSeries trucks, which account for 90 per cent of its global auto profits, according to Morgan Stanley.
Ford started offering discounts of more than US$10,000 on the new truck in some areas after U.S. sales fell 8.9 per cent last month. Yet, incentives average US$3,900 per truck and are down from last year, Shanks said.
General Motors Co.’ s Chevrolet Silverado and Fiat Chrysler Automobile NV’s Ram truck have gained share at the F-150’s expense by dialing up discounts and promotions.
“I welcome it, go for it,” Shanks said. “Clearly, as we’re going through a launch, they’re trying to take advantage of that. But we’re coming out of the launch now and building stock, so we’re ready for it.”
After Ford reported earnings, the company’s shares jumped as much as 3.1 per cent to US$15 in early trading. The shares closed up 1.9 per cent at US$14.83 at in New York.
Ford’s margins are approaching or surpassing those of German luxury automakers such as Daimler AG and BMW AG, which means it’s time to sell shares of the U.S. automaker, Adam Jonas, an analyst for Morgan Stanley, wrote in a note titled “Ideal Conditions to Reduce Positions.”
“Can it get better than this?” wrote Jonas, who has an underweight rating on Ford. “Sure. But how much better?”
Ford has said it is selling many of its F-150s loaded with pricey leather seats and technology, which helps margins. The truck is selling for US$44,100 on average, the highest transaction price of any full-sized pickup on the market, according to Erich Merkle, Ford’s sales analyst.
Yet, Ford sold 25,000 fewer F-150s in the second quarter compared to a year ago and the truck did not add to profits as much this year as it did in last year’s second quarter, Shanks said.
“The F-150 is clearly doing well, but it was still in launch phase during the second quarter,” Shanks told analysts on a conference call today. “We had higher pricing and it was not just F-150, it was across many products in the portfolio.”
Ford’s pre-tax operating income in North America rose to a record of US$2.6 billion from $2.4 billion, as Ford boosted North American production by 1.6 per cent to 815,000 cars and trucks. Ford said it now believes its North American operating margin will be the high end of its forecast of 8.5 per cent to 9.5 per cent.
Investors have been frustrated waiting for the F-150 to hit its stride and had driven down shares by 12 per cent through Monday since they peaked at US$16.57 on March 2. Low gas prices cut both ways for Ford, boosting sales of its SUVs, while causing concern about slack demand for its fuel-efficient aluminum pickup.
Lower sales of cars and pickups reduced Ford’s U.S. market share to 15.1 per cent in the first half from 15.5 per cent last year, according to researcher Autodata Corp. F-Series sales fell 2.4 per cent in the first half. Second-quarter automotive sales slipped to US$35.1 billion from US$35.3 billion.
Revenue was reduced by a US$2.2 billion currency hit from the strong dollar in overseas markets, Shanks said.