All eyes are now on Ford: analyst
Ford Motor Co (F-N) reported its best first-quarter profit since 1998 as higher prices for its redesigned vehicles more than offset pressure from spiking commodity and oil prices.
The stronger-than-expected profit posted Tuesday represented Ford's best first-quarter performance since the peak of the SUV boom more than a dozen years ago.
The result also showed the success that the No. 2 U.S. automaker has had in getting consumers to pay more for improved quality in its cars and new technology in vehicles like the new Focus compact.
Ford also said it expected to ride out the disruption in parts supplies from Japan with only a minimal impact to its production in Asia, setting the automaker up to take share from its Japanese rivals, analysts said.
Ford shares have gained almost 10-fold from early 2009 but skeptical analysts and investors have cited higher engineering costs and disappointing results in Europe as they marked down Ford's prospects.
Chief Financial Officer Lewis Booth repeated that Ford expected full-year profit to rise and said the first-quarter results put the automaker on track to meet that forecast.
"This is a great start to the year," Booth told reporters at Ford's headquarters in Dearborn, Michigan.
Higher sales prices contributed $900 million US to Ford's first-quarter pretax profit. By contrast, commodity price pressure and other material cost increases represented a drag of $700 million.
In its home market in the United States, average margins rose $250 per vehicle in the first quarter, from a year earlier, Edmunds.com said.
"Ford continues to get market share. We expect this trend will continue," said Channing Smith, co-manager of Capital Advisors Growth Fund, which owns Ford shares. "I think Ford and a lot of the other American automakers will take market share from the Japanese."
Ford was the first U.S. automaker to report earnings since the March earthquake in Japan, and its results signaled that its Detroit rival General Motors Co could also take share from Japanese competitors Toyota Motor Corp., Nissan Motor Co Ltd and Honda Motor Co, Morningstar analyst David Whiston said.
Ford's net income rose to $2.55 billion, or 61 cents a share, compared with $2.09 billion, or 50 cents a share, a year earlier.
Excluding one-time items, it earned 62 cents a share, easily topping the 50 cents that analysts polled by Thomson Reuters I/B/E/S had expected. It was the seventh straight quarter of operating profit.
Revenue rose to $33.1 billion from $28.1 billion last year. Analysts had expected $29.7 billion.
Ford Chief Executive Alan Mulally said results in later quarters of this year may not be as strong as the first quarter.
In a conference call with analysts, Mulally said Ford was well-positioned for what he called a marked shift away from large cars and trucks to smaller, more fuel-efficient vehicles.
CFO Booth said that so far since the March 11 earthquake in Japan, the automaker has lost the production of 12,000 to 14,000 vehicles in Asia, where it has shut several plants temporarily.
Any near-term production losses are likely to recover in late 2011 and into 2012, Ford said. Production in Ford's business regions outside of Asia has not yet seen much change.
Ford maintained its projections for North American production in the second quarter at 710,000 vehicles. For the first time, Ford disclosed its projected second-quarter global production figure of 1.46 million.
Ford said higher commodity costs including oil and gasoline prices may provide headwinds to growth for the rest of the year.
J.P. Morgan analyst Himanshu Patel in a research note cited a profit rebound in North America driven by stronger pricing and lower costs. He also pointed to stronger-than-expected results at Ford Credit that he called "unsustainable."
Ford Motor Credit Co earned $713 million in the first quarter on a pretax basis. Patel had expected $428 million and credited the higher number to a stronger-than-expected performance on lease residuals.
Ford regained its footing in Europe in the first quarter, showing a pretax operating profit of $293 million, up from $107 million a year ago. Sales in Europe rose $1 billion to $8.7 billion.
In the fourth quarter, Ford reported an operating loss of $51 million in Europe and failed to meet analyst expectations.