Ford (F) Shares Slide After Second Quarter Earnings Miss

Shares of the Ford Motor Company (F) were trading down -0.88 or -6.36 percent to $12.96 per share in Thursday’s premarket after the company reported second quarter earnings that missed analyst expectations early this morning. Ford Motors stock closed at $13.84 per share, down -0.02 or -0.14 percent in Wednesday’s regular trading session.

Stock Analysis

Founded by Henry Ford in 1903, Dearborn, Michigan based Ford Motor Company is a multinational manufacturer of automobiles and the largest U.S. car maker.
Ford was the first company to manufacture automobiles on a large scale on moving assembly lines. The company sells cars, trucks, SUVs and electrified vehicles under the Ford and Lincoln brands and owns eight percent of UK automaker Aston Martin, as well as two percent of Japanese Mazda and a 49 percent stake in Chinese company, Jiangling. Ford also owns Australian performance carmaker FPV and Brazilian SUV manufacturer, Troller.

For the company’s second fiscal quarter of 2016, Ford reported net income of $2.0 billion, versus $2.19 billion in the same period one year ago, a decline of nine percent. Earnings per share came to $0.49 compared to $0.54 in 2015’s second quarter, off -11 percent. On an adjusted basis, earnings were $0.52 per share, 13 percent lower than last year. Analysts expected the company to post earnings per share of $0.60.

Ford President & Chief Executive Officer, Mark Fields said in this morning’s press release that, “We delivered another strong quarter – one of our best second quarters ever – and record pre-tax profits for the first half of this year. We remain committed to delivering another full year of strong profitability, even as we address some new risks and market challenges around the world.”

Ford’s second quarter revenue increased six percent year on year to $39.5 billion, including revenue from the company’s Ford Credit Finance unit. The company’s pretax profit declined to $400 million compared to $506 million in 2015’s second quarter, which reflected a small increase in credit losses from delinquent loans and lower auction prices.

Ford’s Chief Financial Officer, Bob Shanks said that, “We do think the U.S. (new vehicle market) is coming down. We think the second half will be lower than the first half,” he added that, “We saw higher industry incentives. In the U.S. we also saw lower auction values, particularly from smaller vehicles. We're expecting to have a weaker third-quarter primarily due to the costs of launching the Super Duty.” The Super Duty refers to Ford’s new redesigned heavy duty pickup truck.

The company reduced its forecast for total U.S. vehicle sales, from a range of 17.5 to 18.5 million to 17.4 to 17.9 million. Ford’s guidance for the full 2016 year said it expects company pretax profit and operating margins equal or better than last year’s. Nevertheless, the “company now sees risks challenging achieving guidance. Entire Ford team working to mitigate the risks” (sic).

Ford stock has been trading in a range between $11 per share to just under $16 per share over the last 12 months. Today’s earnings miss, the lower full year guidance and reduced forecast for U.S. vehicle sales for the rest of the year could put continued pressure on Ford’s share price.

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Published on Jul 28, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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