Ford’s 1Q profit falls 39 percent; shares drop
DEARBORN, Mich. – Results at Ford Motor Co. could test investors’ willingness to hang in during a year of lower profits on the promise of better returns ahead.
Ford said Thursday its first-quarter net income fell 39 percent to $989 million, or 24 cents per share. That’s down from $1.64 billion, or 41 cents per share, in the January-March period a year ago.
Dearborn-based Ford had warned that this year would be leaner than 2013, when it enjoyed a near-record pretax profit of $8.65 billion. It’s a transition year for the company, which is launching a record 23 vehicles worldwide and building seven plants, including four in China.
That means a lot of up-front costs that won’t immediately pay off. For example, Ford is halting production at its U.S. truck plants for 13 weeks this year to prepare for the launch of the new aluminum-clad F-150. It won’t see substantial sales of the truck until next year.
The results also held some surprises for investors, including a $400 million contribution to Ford’s warranty reserves and $100 million in higher shipping costs and other weather-related charges from the brutal winter.
Excluding a charge for plant closings in Europe, Ford earned 25 cents. That was far short of Wall Street’s expectations. Analysts polled by FactSet forecast earnings of 31 cents per share. Ford’s shares fell 3.3 percent to $15.78 in afternoon trading.
Chief Financial Officer Bob Shanks promised that results will improve in subsequent quarters. Ford still expects a full-year pretax profit in the $7 billion to $8 billion range despite volatility in South America, Russia and Turkey, he said.
“We feel that we’re moving forward very nicely in what we expect for the year, and it’s setting us up for stronger growth and stronger profitability in 2015,” Shanks told reporters Friday.
Revenue rose slightly to $35.9 billion. Worldwide sales were up 6 percent to nearly 1.6 million.
Most analysts were resigned to slogging through 2014 with Ford on the expectation of an upside next year.
“We think Ford is on track for meaningful net income improvement in 2015,” said S&P Capital IQ analyst Efraim Levy, who has a “Buy” opinion on Ford’s shares.
North America struggles
Ford’s powerhouse North America division, which led it out of the recession five years ago, slipped in the first quarter. Sales fell 2.4 percent, the first year-over-year decline in the region in nearly two years, hurt by bad weather and low buyer interest in smaller, fuel efficient cars like the Focus and C-Max hybrid. While the F-Series pickup continued to see gains, sales of other big sellers like the Fusion sedan and Escape SUV fell from last year.
North American pretax profit fell 37 percent to $1.5 billion. Revenue in the company’s most profitable region fell 5 percent to $20.4 billion.
North America took the $400 million hit for warranty and repair costs. The company said costs for warranty claims have been rising, so it decided to add $340 million to its reserves this quarter for vehicles from the 2008 through 2013 model years.