Ford Motor Co. posted a 44% surge in second-quarter profit, exceeding analysts' estimates thanks to consumers paying big money for fully loaded versions of the new aluminum-body F-150 pickup.
Ford reported net income of $1.9 billion, or 47 cents a share, compared with $1.3 billion, or 32 cents per share a year earlier. Profit beat the 37-cent average estimate of 17 analysts surveyed by Bloomberg News.
The results ease pressure on Ford for the second half. CEO Mark Fields has pledged pretax profit will grow by as much as 51% this year as Ford resumes full production of the F-150, its top-selling model. Ford started offering discounts of more than $10,000 on the new truck in some areas after U.S. sales fell 8.9% last month.
“We are confident the second half of the year will be even stronger,” Fields said in a statement.
Ford has said it will be the end of September before dealers are fully stocked with F-Series trucks, which account for 90% of its global auto profits, according to Morgan Stanley.
“Ford is all about the second half of this year,” said David Whiston, an analyst for Morningstar Inc. in Chicago, who rates Ford the equivalent of a buy. “The F-150 will be at full availability then, and the new Edge and Explorer SUVs are coming out at a time when gas is still pretty cheap.”
Ford has said it is selling many of its F-150s loaded with pricey leather seats and technology, which helps margins. The truck is selling for $44,100 on average, the highest transaction price in the full-size pickup segment, according to Erich Merkle, Ford’s sales analyst.
Ford’s pretax operating income in North America rose to a record of $2.6 billion from $2.4 billion as the automaker boosted North American production by 1.6% to 815,000 cars and trucks. Ford said it now believes its North American operating margin will be the high end of its forecast of 8.5% to 9.5%.
Lower sales of cars and pickups reduced Ford’s U.S. market share to 15.1% in the first half from 15.5% last year, according to researcher Autodata Corp. F-Series sales fell 2.4% in the first half. Second-quarter automotive sales slipped to $35.1 billion from $35.3 billion.
Revenue was reduced by a $2.2 billion currency hit from the strong dollar in overseas markets, Shanks said.
Investors have been frustrated waiting for the F-150 to hit its stride and have driven down shares by 9.4% since they peaked at $16.06 on April 28. Low gas prices cut both ways for Ford, boosting sales of its SUVS while causing concern about slack demand for its fuel-efficient aluminum pickup.
Ford sold 25,000 fewer F-150s in the second quarter compared with a year ago but is beginning to see the payoff in the higher prices consumers are paying, Shanks said.
“This thing is really going to continue to perform like a rocket,” Chief Financial Officer Bob Shanks told reporters at Ford's headquarters in Dearborn, Michigan, on July 28. “The F-150 is performing very, very well.”
Ford Motor Credit, the financing arm, contributed a pretax profit of $506 million, up $72 million from a year ago on an increase in consumer loans globally and leasing in North America, the automaker said.
In Europe, where turmoil in Russia forced Ford to abandon a plan to return to profitability this year, pretax operating losses of $14 million reversed a profit of $14 million last year. Ford’s sales in Europe rose 15.8% last month and are up 10.5% this year on strong gains by the Kuga and EcoSport SUVs, along with the Fiesta subcompact.
In South America, Ford posted a narrower pretax loss of $185 million compared with a $295 million loss a year earlier. A currency crisis caused Ford to start selling cars in Venezuela in dollars to alleviate a shortage of greenbacks that has slashed its imports and paralyzed its plant. Ford temporarily halted production there in May because it had no foreign currency to import parts.
In Ford’s Asia-Pacific region, pretax earnings rose to $192 million from $159 million a year ago. The company's torrid growth in China cooled considerably this year. Sales fell 3% in June and are up only 0.1% for the year as the government puts the brakes on automotive growth.
“China is slowing,” Shanks said, adding that Ford has lowered its forecast for industrywide sales in China to be between 23 million and 24 million, down from a previous projection of 24.5 million to 26.5 million cars and trucks.
Ford hopes to jump-start sales in China with the continued rollout of its Lincoln luxury line and introductions of the Ford Taurus sedan, Everest and Explorer SUVs later this year.
Automotive debt, which excludes Ford Motor Credit, was $13.7 billion on June 30, up from $13.4 billion on March 31.
“Ford has a good product lineup across the board,” said Bernie McGinn, CEO of McGinn Investment Management in Alexandria, Virginia, which holds about 400,000 Ford shares. “The frustration I have with our Ford stock is it doesn’t seem to want to get above $18, and I can’t figure out why nobody wants to reward them.”