Ford Motor (F, Financial) released its fourth-quarter results last week, beating Wall Street estimates. The automaker reiterated its earnings forecast for 2016 and expects it to be equal to or better than last year. Ford generated most of its income from the North American market where auto demand remains strong with falling gasoline prices. Here’s a closer look at the carmaker’s quarterly performance and its future outlook.
Quarter at a glance
Ford surpassed analysts' expectations for the quarter by recording earnings of 58 cents per share on revenue of $40.3 billion. The automaker had registered earnings of 26 cents on revenue of $33.80 billion in the last year comparable period. Analysts had been expecting the company’s earnings to come in around 50 cents per share.
For the full year, Ford generated revenue of $149.6 billion and profit of $10.8 billion, which is close to the upper end of its guidance. Strong profits did not come as a surprise as Ford CEO Mark Fields stated early in the month that the pension cost would fall owing to an accounting change. This boosted the automaker’s bottom line.
Ford’s F-Series sales increased 15% in December, which were driven by its most popular model, the F-150. The F-150 has been the top-selling truck in the U.S. for 39 straight years and the best-selling vehicle in the country for 34 years. The U.S. auto market is on a roll with strong demand for trucks and SUVs. As such, automakers are witnessing healthy sales of their vehicles. Credit availability, a recovering economy, an aging fleet with an average age of more than 11 years and falling gas prices boosted auto sales in 2015. Ford sold 2.6 million vehicles in the last year.
Sales stats from www.goodcarbadcar.net
Ford continued to extract the maximum profit from the North American market in the last quarter as well. Of the $9.3 billion recorded as earnings for the full year, $2 billion came from North America, which is an improvement of 26% over 2014. The region reported a profit margin of 8.2% in the fourth quarter and 10.2% for fiscal 2015.
International performance
While North America was a strong market for the Blue Oval, things were not the same in the rest of the world. Europe’s been a troubled market for all automakers for the past few years. However, Ford has a different story to tell. The automaker is slowly and steadily making its way to profitability. The company made profit for the first time in the region since 2011 by earning $131 million in the last quarter and $259 million in the whole year. The company is in the process of widening its lineup and alleviating concerns in Russia.
South America portrayed weakness during the quarter. Ford suffered a loss of $295 million during the quarter and $832 million for fiscal 2015. Brazil was the key troubled spot, responsible for almost the entire loss in Latin America. Asia Pacific, on the other hand, fetched better numbers. Ford saw profit of $444 million in the last quarter and a record $765 million in 2015 in Asia Pacific. China remains an important Asian market for the automaker, but the economy has been slow in the past year. In the Middle East and Africa, the company made $13 million during the last quarter and $31 million for the entire year.
Future outlook
Robert Shanks, Ford’s executive vice president and chief financial officer, believes that, although the global economy is sluggish, the auto industry has shown resilience. He does not think auto sales or margins will be impacted. He also said sales or profit margins should continue moving strongly through 2018. "I don't see that we're at the peak and ready to fall over."
Low gas prices, easy credit flow and an improving housing market are expected to bolster the demand for trucks.
Shanks further said, even in the face of a downturn, "We have a strong robust structure. We'll be ready." Also, the fact that the international market, barring South America, is fetching positive numbers gives comfort regarding the company’s diversity and stability in the face of an inevitable depression.
Ford expects to record strong numbers in the current fiscal as well. The company is finally being rewarded for the high stake it had taken in launching the aluminum-bodied F-150 for which it had two of its prime factory units closed for retooling. He said, "We are benefiting from the big bet we made on F-150." The company expects 2016 U.S. sales to be in line with 2015 and see development in Europe and Asia.
