Ford 1Q earnings down on recalls, lower sales; revenue rises

Apr 30, 2017, 01:18
Ford 1Q earnings down on recalls, lower sales; revenue rises

Wall Street expected earnings of 35 cents per share, according to analysts polled by FactSet.

The lower first-quarter results, which beat analysts' forecasts, are a result of increased costs from the company's investment in trucks and utility vehicles.

The No. 2 US automaker had warned investors in late March that higher expenditure and lower sales volumes would have an impact on its quarterly earnings. Net profit for the first quarter decreased 36% from $2.5 billion, or $0.61 per share a year earlier to $1.6 billion, or $0.40 per share, but also beating analysts' expectations of $0.35 per share. Ford listed $467 million in warranty costs for the quarter, including two product recalls in March that cost the company $295 million.

Net income fell 35%, from $2.46 billion in the first quarter of 2016 to $1.59 billion.

Despite rough first quarter results Ford did say it expects a profit before taxes of $9 billion during 2017.

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Ford's chief financial officer, Bob Shanks said the company remains on track for a full-year pre-tax profit of US$9bn, down from the US$10.4bn reported in 2016. Total expenses were 96.32 percent of quarterly revenues, up from 93.50 percent for the same period previous year.

Ford (F) posted stronger-than-expected earnings Thursday but cautioned that rising costs will hit its full-year bottom line.

Now, amid plateauing USA auto sales and heavy discounting across the industry, the vehicle maker is struggling to keep its profit momentum going.

Ford is coming off one of its most profitable periods in history with North America benefiting from two consecutive years of record USA auto and truck demand. Cable Communications revenue rose 5.8%, and the company added 297,000 Customer Relationships for cable during the first quarter.

Ford's revenue climbed 4 percent to $39 billion in the first quarter.

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Ford's shares traded up about 2.3% in Thursday's premarket to $11.85, after closing at $11.60 on Wednesday, in a 52-week range of $11.07 to $14.22.

Net income fell 35 percent from the same quarter past year. The industry as a whole saw a transaction price increase of $506.

Executives still continue to expect North America operating margin and profit lower than 2016, due in part to higher commodities costs and increased investments in emerging opportunities.

"Tesla is just all about the long-term potential of the company", David Whiston, an analyst with Morningstar Inc.in Chicago, said by phone ahead of Ford's earnings release.

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