Ford Profit Doubles as New Models Soar -- WSJ
29 April 2016 - 5:03PM
Dow Jones News
Auto maker earned $2.5 billion as margins jump on higher output,
demand for new cars
By Christina Rogers
Ford Motor Co. reaped the benefits of its costly F-150 truck
revamp, doubling income in its first quarter and posting a North
American operating margin rivaling those returned by luxury
brands.
The Dearborn, Mich., company is among auto makers benefiting
from record U.S. light-vehicle demand and low gasoline prices, a
trend fueling sales of the most profitable models on dealer lots.
As sales of trucks and sport-utility vehicles soar, Ford is
receiving a strong profit and sales boost from product redesigns
rolled out since Chief Executive Mark Fields took over in
mid-2014.
The No. 2 U.S. auto maker by sales also is gaining steam in
China, earning more than $400 million last quarter in a country
where it historically has lagged far behind General Motors Co. and
bigger rivals. That momentum in China, combined with an abrupt
reversal of fortunes and return to profit in Europe, is more than
offsetting weakness in South America, Russia and other emerging
markets.
Ford reported profit of $2.5 billion, or 61 cents a share, up
from $1.2 billion, or 29 cents a share, in the first quarter of
2015. That year earlier quarter was hurt by short supplies of the
latest F-150 truck as production of the aluminum-bodied vehicle was
still gearing up. Last quarter, the company was able to flood the
U.S. market with that high-margin truck.
In North America, Ford posted a record 12.9% operating margin
for the three months ended March 31, far outpacing GM's 8.7% and
the 7.2% reported by Fiat Chrysler Automobiles NV, both for the
same quarter.
The strong profit follows a quarter when Ford relied heavily on
fleet sales to support market-share growth in the U.S. Typically
considered to be less profitable than retail sales, Ford's reliance
on fleet business had been a source of concern for analysts.
On an operating basis, the company earned $3.8 billion or 68
cents a share, and the margin in its global automotive business
nearly hit 10%. While far less than the global margin for some
Japanese auto makers who traditionally benefited from currency
translation, Ford's result is considered strong by Detroit's
standards.
Its results handily beat analyst expectations of 48 cents a
share and could cheer investors who have been concerned that Ford's
profitability has peaked as growth in the U.S. appears to be
cooling. Its shares rose 3.4% to $14.12 in morning trading in New
York.
Ford's revenue increased 11% to $37.7 billion, from $33.9
billion in the same period a year ago.
"You're starting to see a better balance of profitability,"
finance chief Bob Shanks said on Thursday, citing improving results
in Asia and Europe. He said the company has an opportunity for
further profit growth in the U.S.
As far as the belief that the best days are behind conventional
auto makers after a half-decade of strong earnings, Mr. Shanks
said, "we're proving that to be a misconception," he said. There is
no sign that U.S. light-vehicle demand is headed for a pothole, he
said. He disputed suggestions that the U.S. economy could be headed
for a mild recession.
The company's launch of a new Super Duty F-Series truck is
coming in the third-quarter. A heavier-duty version of its pickup
truck line, Mr. Shanks said, it is the first major overhaul in 19
years and it should help lift earnings in the back half of this
year.
Robust demand for Ford's pricier trucks, including the F-150
pickup, in the U.S. continued to drive its operating profits in
North America, which nearly doubled to a record $3.1 billion in the
first quarter versus a year ago. Ford's U.S. sales grew 8.4% in the
first quarter.
Ford posted its best quarter in Europe since 2008, swinging to a
$434 million pre-tax profit from a $42 million loss in the same
period in 2015.
Profit in Asia Pacific doubled to $220 million versus $105
million a year ago amid growing profitability in China. Ford's
equity income from its Chinese joint ventures was up 23% to $443
million in the just-ended quarter.
In South America, its operating loss widen to $256 million on
spreading economic malaise in the region.
Write to Christina Rogers at christina.rogers@wsj.com
Corrections & Amplifications: Ford's North American
operating margin was 12.9% last quarter. An earlier version of this
article incorrectly stated it was 12%. (April 28)
(END) Dow Jones Newswires
April 29, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
General Motors (NYSE:GM)
Historical Stock Chart
From Apr 2024 to May 2024
General Motors (NYSE:GM)
Historical Stock Chart
From May 2023 to May 2024