Ford Motor’s (F, Financial) third-quarter results failed to impress investors with profits dropping 55% to $1 billion. This is a reflection of weak auto sales in the U.S. in August and September.
A decline was apparent as the company posted its best third-quarter results in the year-ago quarter by registering a profit of $2.2 billion. Ford made 26 cents per share this quarter in comparison to last year’s third quarter when it earned 45 cents per share. Here’s a brief look at the Blue Oval’s quarterly performance.
A bird’s eye view
Ford recorded quarterly revenue of $35.94 billion, a decline of 6% compared with last year, and generated profit of $1 billion.
Ford posted a profit of $1.26 billion in North America before interest and tax. However, the company’s operating profit margin plunged to 8.4%. It recorded a strong performance in the Asia Pacific region where it earned $131 million.
Europe was a bright spot for the company as it recorded its best third-quarter profits since 2007. The pretax profit in the region was $138 million. In contrast, the company faced a loss of $295 million in South America.
Chief Financial Officer Bob Shanks said Ford registered negative cash flow of $2 billion but should bounce back in the fourth quarter. What actually brought down Ford’s earnings were the launch costs of the Super Duty and the supply issues. The company might face higher costs in the near future. Its operations in North America, the Middle East and Africa were not profitable.
Shanks said the third quarter and year to date metrics for the company were lower. He explains the key reason behind the fall was “the external conditions in South America, which remain challenging.” The drop in revenue is attributable to the decline in sales volume as well as the unfavorable fluctuation in foreign currency. The company’s share of the market also fell. As far as the seasonally adjusted annualized rate is concerned, South America was down 10% to 400,000 cars and vehicles. This was on account of Ford’s disappointing performance in Brazil.
Looking ahead
During the earnings call conference, Marks Fields said that the company has reported strong results so far in the first three quarter of the fiscal. The company is confident of achieving its full-year guidance on adjusted pretax profit, which is expected to come in around $10.2 billion. This would be the second-best results since 2000. Though profit for the third quarter was lower than the prior year, it came in better than expected.
The Blue Oval successfully introduced the all-new Super Duty and the Lincoln Continental in its home market. The company also is working out its strategy to address the challenges including stagnating sales in the U.S. retail market, insecurity in Europe after Brexit and the increasing spending on incentives in the U.S.
Ford’s cash flow for the first nine months of the year continues to be a strong point for the company. The automaker has been rewarding investors with regular dividends. Ford is committed to its strategy to expand its operations and grow its business in the domestic and international market. Besides, the company remains focused on tapping the emerging opportunities in the electric vehicle space for sustainable future growth.
Disclosure: I do not hold any position in the stock discussed in this article.
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