World famous automaker Ford Motors (F, Financial) declared its first quarter results on April 28, disappointing analysts and investors as the numbers fell much below their expectations. The first quarter represents a slow start to the fiscal year 2015, though management is upbeat on delivering much better numbers in the next few quarters. The Dearborn automaker’s CEO, Mark Fields, stated that Ford is on track for a “breakthrough year” which is still to take its final shape in the coming quarters. Let’s quickly take a look at the major facts shared during the earnings call this Tuesday.
The quarter highlights
Net income for the quarter was down by $65 million from that reported a year earlier, at $924 million. Earnings per share were also down by $0.02 per share year over year at $0.23 a share. It also missed the analysts’ consensus of $0.26 a share for the quarter. Ford blamed the strong U.S. dollar along with the continuing rollout of the F-150 pickup and the Edge crossover which increased the production costs and dragged the net income for the quarter. Revenue was at $31.8 billion, about $2 billion lower than that expected by analysts that were hooked at $33.9 billion. Roughly 70% of the major revenue decline was attributed to the strong dollar during the earnings conference.
Ford’s struggle in Europe continues to gain traction because of the trouble it has been facing in the Russian market. The automaker lost about $185 million in the quarter, a $9 million improvement
from the same quarter a year ago. However, the company urges to introduce new vehicles in Russia and to continue its investments in Russia as well. CEO Mark Fields stated, “We still hold the view that when the market stabilizes and ultimately recovers, it could be one of the biggest, if not the biggest market in Europe, and it's important for us to be there…”
In the Asia-Pacific region, much of its success could be attributed to the 10% rise in volume seen year-over-year in China where Ford’s performance in the first quarter was highly encouraging. In Middle East and Africa, Ford is now expecting to break even this year, after having reported losses in the region earlier as it adds capacity in such geographies.
The F-Series vehicles represent nearly 90% of Ford’s global automotive profit as per a Bloomberg report. However, due to the production issues faced recently on the F-150 pickup truck, the profitability in North America was a bit affected. This led to North American operating margins coming in at 6.7% which would otherwise have soared 10% in the quarter.
F-150 truck to push future sales growth
In the beginning of the month, the F-Series supercrew edition received the highest safety designation from the National Highway Traffic Safety Administration. The earlier F-series that was made of steel had received a four-start safety rating from the same agency. The management is optimistic that the results for the remaining year would be stronger based on the sales generated from the new vehicles launched, of which the F-150 pickup truck remains the main sales attribute.
Beginning next quarter, the story is about to change with the Edge and F-150 being in full production at their respective plants which could aid in lifting the slow sales witnessed in the quarter from these two vehicles. CFO Bob Shanks expects the production rates to normalize for the Edge and F-150 in North America which could aid in easing the automaker’s challenges in the pickup truck segment over the coming 12-months.
According to a Reuters report, Ford has improved its forecast on the operating margins in North America from 8%-9% to 8.5%-9.5%. Thus, Ford expects the second half of the year to be a strong one with its F-150 trucks and Edge SUVs resuming full production, after showing a sales drop in the first quarter.
Final word
In an interview with TheStreet.com, Ford CFO, Bob Shanks, has noted that the automaker is now coming out of its launch stage for the upcoming models and thus expects to have a much better financial playbook towards the second half of the year from North America. Let’s stay tuned and keep an eye on how the F-150 truck sales gets the ball rolling for the Dearborn automaker.
