Ford Motor Co. posted third-quarter profits that fell short of analysts' estimates as higher taxes reduced the payoff from its aluminum-bodied F-Series pickups.
Earnings excluding some items were 45 cents a share, the company reported in a statement Tuesday. The average of 18 estimates compiled by Bloomberg was 47 cents. Net income more than doubled to $ 1.9 billion from $ 835 million a year earlier when Ford was changing over to the new F-150 pickup.
After pleading for patience while Ford's profits sagged last year, Chief Executive Officer Mark Fields is starting to pay off on his promise to boost pretax earnings by as much as 51 percent this year. The F-Series had its best third quarter in nine years, with an 8 percent increase to U.S. sales of 207,271. The trucks, which are the top-selling vehicle line in America, account for 90 percent of Ford's global automotive profit, according to Morgan Stanley.
"I have very high expectations for Ford for the second half of 2015," said David Whiston, an analyst at Morningstar Inc. in Chicago, who rates Ford shares the equivalent of a buy. "This is the first test to see if they can deliver on what they promised."
The company maintained its full-year forecast for pretax profits of as much as $ 9.5 billion and said North American profit margin for the year would be on the high end of its projected 8.5 percent to 9.5 percent range. In the third quarter, it was 11.3 percent, Ford said.
F-Series inventory finally approached normal at the end of the third quarter after an almost two-year overhaul of a pair of factories producing the trucks sapped supply and dented earnings. To improve fuel economy and efficiency, Ford cut 700 pounds (318 kilograms) from the F-150's weight by outfitting it with aluminum body panels. F-Series U.S. sales are up 1.3 percent this year.
Since F-Series sales soared 16 percent in September, Ford's shares have been rising. The stock gained 16 percent this month to $ 15.68 at the close Monday, for an increase of 1.2 percent this year.
"Ford took a big risk with the F-150 and if it hadn't worked out, it would have been troublesome," said Bernie McGinn, CEO of McGinn Investment Management in Alexandria, Virginia, which holds about 400,000 Ford shares. "But it seems to be working out."
Rich Mix
Ford is selling a rich mix of F-150s, loaded with leather and technology, though average prices have fallen as the Dearborn, Michigan-based automaker has boosted incentives to take on rivals. The pickup sold for an average of $ 42,400 in September, up $ 2,100 from a year earlier but down from $ 44,100 in June, Ford has said. The company has offered discounts of as much as $ 10,000 on the truck.
Low U.S. gasoline prices also have helped Ford by driving up sales of high-profit sport utility vehicles such as the Ford Explorer and Lincoln Navigator. The reduced fuel costs and low interest rates pushed U.S. auto sales to an annualized selling rate of 18.2 million in September, the highest in more than 10 years.
"Sooner or later, if you keep generating good news, the stock goes up," McGinn said. "Maybe it's time."
Third-quarter automotive sales rose 9.1 percent to $ 35.8 billion as Ford boosted North American production by 19 percent to 825,000 cars and trucks. The average of 14 estimates for that revenue was $ 35.1 billion.
In North America, Ford's pretax operating income almost doubled to a record $ 1.7 billion, from $ 1.4 billion a year earlier. The company's U.S. sales of SUVs have jumped 8.8 percent this year, while its car deliveries have fallen 1 percent. That has left Ford's U.S. market share unchanged at 15.1 percent for the year through September, according to Autodata Corp.
UAW Negotiations
Ford is in contract talks with the United Auto Workers for 52,900 U.S. hourly workers. The UAW has already ratified an agreement with Fiat Chrysler Automobiles NV and has a tentative deal with General Motors Co. The union is using the FCA accord, which includes across-the-board raises and closes the pay gap between newer hires and veteran workers, as a pattern at GM and Ford.
"I always have reservations about labor talks throwing a monkey wrench into things," McGinn said. "But everyone still has fresh memories of the near-death experience of seven years ago."
Ford's F-150 rollout continues to be a focus, including at credit rating companies. Fitch Ratings, which has Ford at its lowest level of investment grade, has had a positive outlook on the automaker for more than year.
"The F-150 was probably the biggest product changeover they've ever had," said Stephen Brown, Fitch's senior director of corporate finance, who oversees automakers. "That was a bit of a rough patch for them. Once we see them get over this hump, we'll have more comfort around potentially upgrading them."
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