Ford Profits Rises but Misses Target on Commodity Prices

Ford Motor Co reported that its 4th-quarter and full-year earnings rose, but missed analysts’ targets as the automaker blamed the rising commodity prices and adverse foreign exchange rates.

Cars sold during 2017 dropped, but due to higher car prices, sales actually edged higher. Profits were impacted by more expensive materials, like steel, as well as increased warranty costs from recalls and its investment in the launch of the Expedition and Navigator SUVs.

On an adjusted basis, the company earned 39 cents a share, missing analyst expectations of 42 cents per share.

Ford reported $41.3 billion in revenue, up 7% from a year ago, and higher than the $36.9 billion analysts were expecting. 

Adjusted pre-tax profit was $1.7 billion in the latest period, boosted by Ford’s North American business and by Ford credit. Pre-tax profit alone at Ford credit was $610 million, up 53% over the same quarter a year ago, according to the automaker.

“Our balance sheet remains strong and we are focused on improving the company’s fitness to strengthen future results,” said Bob Shanks, Ford CFO. “We remained committed to providing value to our shareholders including expected distributions totaling about $3.1 billion in 2018.”

Earlier this month, Ford said that it expected disappointing results for 2017. Its 2018 profits would also fall short, given rising commodity prices and its investments in developing SUVs, electric, and autonomous driving vehicles.

“Clearly, my team and I are not satisfied with this level of performance,” said Jim Hackett, Ford CEO. “We simply have not done enough to be fit today.”

The company is still too bloated to absorb all of those hits and grow profits in 2018, Shanks said.

“We have to be fit, far fitter than we are,” he said. “The fitter we are, the more options we have to succeed in the future because we have more cash, more flexibility.”

2018 would be a tough year for Ford as profit sharing checks for about 54,000 hourly US factory workers at Ford would plunge to an average of $7,500 compared to a $9,000 payment from the previous year.

Meanwhile, for the whole car industry, US new car sales reported a 1.8% fall last year, the 1st decline in sales since 2009, although sales volume is still near record levels. Automakers are also expected to report good results since global sales are growing and car buyers are paying record average prices.

Ford shares hit a 12-month high on January 16, the same day it announced a disappointing outlook after the market. Since then, its shares have dropped more than 10%, and was trading at $11.99, down 0.50% in pre-market session.

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