Ford’s Earnings Beat Analysts’ Predictions
Ford Motor Co. earned $2.38 billion in profit for the second quarter--beating Wall Street’s expectations--as the auto maker enjoyed strong truck sales and cut $900 million in costs.
The results were down from $2.5 billion in the year-ago period, when Ford still owned financial services company Associates First Capital. But excluding income from that subsidiary, which the auto maker spun off to shareholders early in 1998, profit rose 7%.
Separately, Ford confirmed that it is considering a buyout program aimed at reducing the number of salaried workers, a move expected to result in further cost cuts.
The auto maker reported second-quarter earnings of $1.91 a diluted share, compared with $1.82 a year earlier, on sales of $37.3 billion, down from $40.3 billion.
Ford’s results were well above analysts’ predictions; the average estimate of 17 analysts surveyed last week by First Call Corp. was $1.81 a share.
“It’s a strong performance,” said Nicholas Lobaccaro, an analyst with Merrill Lynch. “They’ve really benefited from cost-cutting and a richer mix of vehicles.”
Despite the results, Ford’s shares fell $1 to close at $59.50 on the New York Stock Exchange. Lobaccaro attributed the drop to profit-taking after Ford’s stock rose 88% this year.
Ford’s automotive operations made $2.1 billion in the quarter, up 17% from the previous year, even as sales dropped 5% from $32.8 billion to $31.3 billion. The North American division saw profit rise 15.5% to $1.7 billion.
Although the company’s vehicle sales are down worldwide, U.S. sales of its highly profitable trucks and sport-utility vehicles, such as the Lincoln Navigator, are up 2.9%.
For the first six months of the year, Ford earned $20 billion, or $16.11 a share, compared with $4 billion, or $3.27 a share, in the first half of 1997. The results from the first quarter this year include a $16-billion gain from the spinoff of Associates First Capital.
First-half sales totaled $73.9 billion, down 5% from $77.5 billion a year ago.
The company said it has already cut $1.3 billion in costs after setting a goal of $1 billion in reductions for the entire year. Chief Financial Officer John Devine confirmed a report in the Detroit Free Press that the company is considering a buyout of some white-collar employees.
“This is a tough business getting tougher,” he said, “and we have to look at all costs.”