Ford’s (NYSE:F) Lower Profit Beats Estimates; Sales Plunged for F-150 Truck

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By Erik Waters on October 24, 2014 Automobile, Company

Ford Motor Co (NYSE:F) stated its year profit outlook this Friday and declared that introducing the F-150 pickup trucks brought a 34 percent plunge in profits for them in the third quarter. Recall costs, shortages of parts and low whole sale volumes of vehicles were also reasons which led to low earnings as stated by Ford. Their performance in North America is believed to be impressive and has helped with earnings but that is not quite enough to satisfy the analysts.

Adam Jones, an analyst from Morgan Stanley, wrote that there is no strong reason leading to buying or selling the company’s stock. Moreover, on the basis of current standings and results, we are not confident that there will be a change in future. In the morning trading, Ford’s shares lost 3.3 percent and traded at $ 13.93. Ford’s aluminum bodied pickup truck F-150 is believed to be a major contributor towards profit for this second largest automobile maker in United States. Therefore, almost half of the 23 worldwide launching planned for the current year has been concluded by Ford (NYSE:F) thus keeping the launch on track.

The planned closing of Ford’s F-150 manufacturing plant in Dearborn, Michigan is considered to be the main cause of revenue decline by 3 percent in the third quarter, which stands at $34.9 billion. In addition, shortage of spare parts has also made 3 percent drop in the wholesale volumes. Without disclosing the identity of the suppliers or the type of vehicles which have been affected, Bob Shanks – Chief Financial Officer, informed about resolving four major issues surfaced at different North American plants. He also made it clear that in the fourth quarter, Ford will not be able to recover all the losses due to less production.

Against the estimated figure of 19 cents per share, Ford (NYSE:F) reported 24 cents per share earnings. Shanks linked this increase to two factors, North America operating results and low tax rates. On Thursday, General Motors Co (NYSE:GM) declared a profit margin of 9.5 percent which is higher than Ford’s 7.1 percent in North America. Ford’s would have reported a profit margin 10.2 percent minus the costs associated with the recalls. As per Barclays, last time in fourth quarter of 2011 Ford lagged behind GM in North American margin. About $600 million was added in Ford’s (NYSE:F) earnings due to increased vehicle prices and almost half of this revenue is earned from North America.

According to Ford’s (NYSE:F) forecast last month, $6 billion would be the profit before taxes this year lower than estimated $7 billion to $8 billion. Moreover, $1 billion would be the cost of recalls with $630 million of the costs incurred in third quarter. Net income of the company fell from last year’s $1.27 billion or 31 cents per share to $835 million or 21 cents per share.

Ford (NYSE:F) is suffering losses in Europe and South America whereas it is making profits in North American and Asian markets. In Europe due to weak sales in Russia, Ford’s losses increased to $439 million from last year’s $182 million. Whereas, Ford captured it’s highest 4.7 percent market share in China.