Ford Posts Higher Profit, Lifts

By Christina Rogers 

Ford Motor Co.'s new chief executive is starting his tenure with the wind at his back, lifting its earnings outlook for the year in a move that helps address concerns about the company's ability to weather softer conditions in the U.S. market.

The Dearborn, Mich., auto maker on Wednesday said a lower-than-expected tax rate, strong pricing on pickup trucks and SUVs and strengthening conditions for its Ford Credit lending arm led to a $2 billion net profit for the year, a 4% improvement over the same period a year ago.

The company issued new guidance, forecasting full-year adjusted earnings per share between $1.65 and $1.85 with the midrange roughly in line with last year's results.

Jim Hackett was hired in May after the board ousted Mark Fields, who had delivered a string of healthy profits over a three-year tenure as CEO but failed to deliver a clear vision of how the company will confront a slate of changes threatening to reshape the auto industry. Ford's stock price also struggled under Mr. Fields, and analysts expressed concern about a weakening profit outlook.

Ford's earnings report somewhat mirrored results delivered by General Motors Co. a day earlier, which were almost entirely driven by core North American performance.

While overall demand is waning in the U.S. market, buyers continue to snap up pricey pickup trucks and sport utilities amid lower gasoline prices, a favorable development for Detroit auto makers that have a lock on the big pickup market and make a disproportionate amount of profit from vehicles like the F-150 or Explorer.

"The company grew this quarter," Chief Financial Officer Bob Shanks told reporters Wednesday morning.

Ford's second-quarter adjusted earnings were 56 cents a share, beating analysts' estimates of 43 cents a share. Ford attributed the beat to a lower-than-expected tax rate due to changes in the way it accounts for losses incurred by the company's overseas operations.

Operating income fell 16% to $2.5 billion in the second quarter due to higher commodity costs, unfavorable exchange rates in China and Europe and one-time charges related to a pullback in small-car production, including the cancellation of a new assembly plant in Mexico earlier this year.

Revenue was $39.9 billion for the April-to-June period versus $39.5 billion a year ago, despite weaker global volumes, including a 3% decline in the U.S. new-car sales in the U.S. in the second-quarter and lower deliveries in Europe due to the changeover to a new Fiesta small car.

North American operating profits were $2.2 billion, down $500 million from the previous year. Margins in the region also slipped in the second quarter to 9%, down from 11.3% a year earlier.

In Europe, Ford posted a pretax profit of $88 million compared with $467 million a year ago with earnings dented by lower sales and an unfavorable exchange rate due to Brexit.

In Asia Pacific, Ford swung to a $143 million operating profit from a year-earlier loss of $8 million, as sales and market share in China improved during the quarter.

Ford's operating loss in South America continued to narrow, with the auto maker reporting $185 million in red ink for the just-ended quarter, compared with a year-earlier loss of $265 million.

Write to Christina Rogers at [e-mail]

(END) Dow Jones Newswires

July 26, 2017 08:56 ET (12:56 GMT)

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