Ford Operating Profit Jumps
Ford Motor Co. on Wednesday reported record second-quarter operating earnings of $2.7 billion, well ahead of industry analysts’ estimates but tempered by one-time charges that took the company into the red.
Strong car and truck sales were behind the operating earnings of $2.20 a share on revenue of $44.5 billion, up from $2.48 billion, or $2 a share, on revenue of $41.9 billion in the year-ago period. The result was considerably higher than the consensus estimate of $2.01 per share by analysts surveyed by First Call/ Thomson Financial.
However, one-time charges of $2.3 billion relating to the spinoff of Ford’s Visteon parts unit and $1 billion from restructuring moves in Europe left Ford with a loss of $577 million for the quarter.
Ford’s report came a day after No. 1 auto maker General Motors Corp. reported that second-quarter profit rose 1.2% to a record $1.75 billion despite slower sales of high-profit trucks than GM had anticipated.
Ford’s North American sales remained strong--indeed, for the first two quarters of this year the No. 2 auto maker’s U.S. sales were up 3.4% from last year’s record pace. The company attributed the strong performance to record truck sales--particularly the Ford Explorer and Expedition sport-utility vehicles and F-Series pickup trucks--but also to the Lincoln LS and Jaguar S-Type luxury sedans.
North American automotive net income was up 7.4%, largely on the back of record truck sales.
“The business accounted for 89% of automotive earnings and 68.4% of total operating earnings, reflecting Ford’s continued dependence on North America,” John Casesa, auto analyst at Merrill Lynch in New York, said in a research report Wednesday.
That dependence could bode ill for Ford and its U.S.-based competitors if U.S. demand cools because of rising interest rates and gasoline prices.
Ford’s European operations, meanwhile, saw operating profit drop from $206 million a year ago to $156 million.
Although Ford would prefer to have a more globally balanced distribution of earnings, “almost all manufacturers are dependent on North America,” said George Pipas, Ford’s sales analysis manager. “The world’s excess capacity is in Asia and Europe.”
The company recently announced the end of auto production at one of its British plants and is converting another factory in Britain from making less-profitable Escorts to a new high-margin Jaguar.
“Ford’s foreign operations, while they’ve been a drag in the past, we’re seeing the bottom and they’re beginning to turn around,” said Richard Hilgert, head of automotive research at Fahnestock & Co. in Detroit. “Especially with Ford’s actions in Europe, the earnings picture for the entire company was very impressive.”
Ford shares rose 50 cents to close at $47.44 on the New York Stock Exchange.
