Warning Lights Go Off for Ford's Earnings for 2018 -- WSJ

By Mike Colias and Allison Prang 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (January 17, 2019).

Ford Motor Co. warned its 2018 profit will fall short of Wall Street expectations and declined to give a specific forecast for this year, illustrating the challenges ahead as it undertakes a major restructuring amid uncertainty in the global auto market.

Ford on Wednesday pegged adjusted earnings for the fourth quarter at 30 cents a share, 2 cents below analysts' estimates, and for the full year at $1.30 a share. It is scheduled to release the results on Jan. 23.

The auto maker said it has the potential to boost earnings in 2019, but held off on setting an earnings-per-share range because of uncertainty on trade issues, Britain's exit from the European Union and other external factors.

"We're very confident about the things we know we can control...but at this point we want to be a little prudent with how specific we are" in forecasting 2019 profit, Ford Chief Financial Officer Bob Shanks said during an investor conference.

Ford's outlook contrasts with rival General Motors Co., which last week gave 2019 profit guidance that exceeded Wall Street estimates. GM's bottom line this year will get a big boost from a restructuring of its North American business, including the closing of several plants and thousands of layoffs.

Ford has allowed much of its product portfolio in the U.S. and China to become dated, executives have said. Several redesigned models are due out this year, including a new Ford Explorer SUV. The company also has acknowledged its costs are too high and plans to eliminate $25.5 billion in cumulative expenses by 2022.

The profit outlooks from GM and Ford show the diverging fortunes of the two largest U.S. auto makers.

GM Chief Executive Mary Barra has consistently delivered results beyond analysts' forecasts, including an 8.2% global operating profit margin through three quarters of last year despite tougher conditions for global auto makers. Ford's operating profit was about half that through the third quarter, at 4.4%, and some investors have said Ford chief Jim Hackett needs quicken efforts to revitalize the business.

Last week, Ford announced the first step in an overhaul of its European business, including likely plant closures and layoffs, as part of what it has said will be a multiyear $11 billion restructuring. GM exited its money-losing European business in 2017 after years of restructuring.

Ford has a large presence in the U.K., and Mr. Shanks said the possibility the country will leave the EU without a formal trade deal poses a "catastrophic" risk to the company's operations there as well as the U.K. auto industry overall. Mr. Shanks added that Ford views a so-called hard Brexit as an unlikely outcome

The less-bullish 2019 outlook Ford offered Wednesday "underscores why GM is so uniquely well-positioned right now," Citigroup Inc. analyst Itay Michaeli said in a note Wednesday.

The lack of formal earnings-per-share guidance from Ford for 2019 didn't sit well with some analysts. Many in recent months have pressed Mr. Hackett, who took the top job at Ford in May 2017, for more specifics on his plans to turn around the business.

"Investor patience is likely to be further tested today as Ford has basically once again said 'your guess' to the financial community," Evercore ISI analyst Chris McNally said in a research note.

Ford shares were down 5.5% in trading Wednesday.

Mr. Hackett said Ford this year will benefit from moves his team has been making to simplify the business, including a plan to eliminate layers of management and speed the development of new vehicles.

Write to Mike Colias at [e-mail] and Allison Prang at [e-mail]

(END) Dow Jones Newswires

January 17, 2019 02:47 ET (07:47 GMT)

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