Ford Motor Co. (F, Financial) reported strong first-quarter numbers, beating analyst estimates on the top and bottom lines.
The company reported earnings per share of 39 cents against the expectation of 35 cents and revenues of $39 billion against the expected $34.7 billion.
The solid quarter did little to change the company’s fortunes in the market as the stock has lost more than 5% of its value since the beginning of the year and more than 11% in the last 12 months. Ford’s profit fell by 35% during the first quarter as the company was hurt by higher commodity prices, product recalls and lower sales.
Ford has been going through a difficult period as sales have been moving lower and lower in the first four months of the current fiscal. Its overall sales declined 1% in January, 4% in February and 7.2% in March.
Ford’s sales numbers declined by 7.2% in April as the automaker sold 214,695 units. The sales decline was across the board as retail, truck and car sales declined, fleet sales were flat and SUV sales increased by 1.2%.
The lack of strong sales numbers explains why Ford stock barely moved after the earnings beat. There is a good possibility it will keep moving sideways – or even lower – until either the next earnings release or until sales numbers start showing an uptick.
Ford blamed plateauing auto sales in the U.S. for its sales decline.
Source: FRED
U.S. auto sales in the first three months of 2017 have been around the 17 million units range. The stable sales numbers are slowly starting to bite auto companies because there is not much room for the auto industry to increase its sales volume from here. The resulting severe competition leads to auto companies pushing each other to offer discounts to keep the volume as high as possible, eating into their margins. The problem with stable numbers is flat sales growth and lower margins.
Disclosure: I have no positions in the stock mentioned above and no intention of initiating a position in the next 72 hours.
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