Ford’s Fourth Quarter Lower Than Expected
While more people have been buying domestic cars at home in the United States, internationally it has been a different story for Ford Motor Co (NYSE:F), whose fourth quarter profits were lower than expected. Commodity costs also led to the diminished quarter. Profit margins fell from 6.1 percent to 5.4 percent, while commodity costs came to $2.3 billion over the company’s forecast of $2.2 billion.
“We saw the external environment deteriorate, and that really affected most regions other than North America,” stated Chief Financial Officer Lewis Booth. According to Booth, the company then “saw slightly greater than we expected impact of commodities, currency and also the Thai floods.”
Ford saw a net income of $13.6 billion, or $3.40 per share, off of one time tax based gain on $12.4 billion. Barring that one time gain, most analysts were expecting the company to average around 25 cents per share after posting 30 cents per share a year ago. Excluding the one-time items, the company posted 20 cents per share. Operating profits also fell from 1.3 billion a year ago to 1.1 billion now.
Many analysts still pose a favorable view of Ford, however, sharing Booth’s assessment that the company was simply coping with, as Gary Bradshaw of Hodges Capital said, “plenty of headwinds.” As Bradshaw said, though, “the company continues to execute.” The implication is that Ford is doing a good job, but are the victim of elements out of their control.
A huge part of that is the economic crisis in Europe, which has led to spending constrictions and austerity across all European markets. Ford’s losses in Europe actually almost quadrupled from a year ago, with $190 million in losses in the fourth quarter compared to $51 million in losses one year ago. Losses in Asia were also steep, as the company posted Asian losses of $83 million compared to $23 million in profit one year ago. South America saw a dramatic decline in profits, down from $281 million to $108 million, but at least still remained profitable.
Booth expects that Ford may end up recovering in Asia in 2012 since the Thai floods represented a significant outlier, but Europe remains a major question mark due to ongoing crisis. Booth pointed out that Ford is competing with a number of European manufacturers who have provided numerous incentives to increase sales in the market. Peter Nesvold, an analyst for Jefferies, however, felt that Ford’s product, though less exposed to Europe than General Motors, may benefit both from being fresher and from being less vital to the company’s overall bottom line. Jefferies still rates Ford as a “buy.”
Ford still earns the bulk of its overall revenue in North America, so the international downturn hasn’t damaged the company too badly. Nevertheless, the company was down about 5 percent in premarket trading.