Ford Beats Forecasts, But Profit Fell in Q1

Ford Beats Forecasts, But Profit Fell in Q1Well, it looks like Ford beats forecasts, but profit fell in Q1. Even though there may be a slight decline in sales, TSC Ford Specialist is confident that their loyal clients will remain optimistic about the year ahead. After all, Ford is the number two best automaker around and has enjoyed year by year auto sale increases since the Great Recession, and hit 17.55 units in 2016! Let’s see how the forecast turned out for Ford and its employees.

The company had warned investors in late March that higher expenditure and lower sales volumes would have a bit of an impact on its quarterly earnings. Chief Financial Officer Bob Shanks told reporters that Ford’s higher costs for 2017 were increased largely in the first quarter and that results for the rest of the year would be “about flat to a little bit better.” Ford also stated that it expects a full-year pretax profit of $9 billion, that is down from the $10.4 billion it made in 2016, as it invests in autonomous cars and new mobility services. They also expect earnings, per share, of between 30 to 35 cents in the first quarter, which is down somewhat from the same period last year and lower than expected.

It looks as though the automaker will be affected by vehicle volumes as demand for new cars and light trucks goes on the back burner and cools down somewhat. Fords U.S. vehicle stocks are in good shape, but there may be a time soon when Ford temporarily shuts down lines at its U.S. assembly plants to cut back production. Of course, this will be a temporary setback, and Ford is optimistic.

2018 still looks solid, though there seems to be room for improvement. “We think we can do more with trucks, we think we can do more with utility vehicles, we can do more with performance and we’ve got plans in place to do that,” Shanks finance reported. He also stated he thinks the rise will come from increases in the core business. As with all automotive competitors out there, it looks like everyone has taken a bit of a slump due to the current situation within the country, but that doesn’t mean it will remain bleak for the auto manufacturers and companies.

So, what do the next five years look like? The automaker is investing heavily in “emerging opportunities” as they develop autonomous vehicles and expand into mobility services such as ride and bike sharing. Last month, Ford announced it would invest $1 billion over the next five years, in artificial intelligence startup Argo AI, to help build the brains of its robot cars, and they also purchased a Silicon Valley-based shuttle service called Chariot. They stated that Chariot would expand to eight cities by the end of 2017, including a city outside of the U.S. as well. Ford is expecting about 20 percent on the profit margins for these new services.

All of Ford’s profit-generating trucks and SUVs are all built in the USA so that in turn will keep Ford in better shape than some of its competitors when it comes to the subject of any import tariffs on Mexican-built vehicles. Ford will be watching closely what President Trump’s next move will be but remains positive on the outcomes. The need for improvement is inevitable, and Ford plans to invest in electrified propulsion, better internal combustion engines, and of course light weight options.

Ford also announced two North American product recalls in March that set the company back by $295 million. The Ford company had recalled more than 230,000 vehicles due to the risk of engine fires and 210,000 vehicles for defective door latches. Also, a recall last fall of 2.4 million vehicles, to fix door latches, cost Ford $600 million. Ford’s first quarter dropped slightly with fewer sales to rental fleets but saw an increase in individual buyers. China also noted fewer sales.

Some quick facts:

  • Ford said the average price that customers paid for a vehicle was up $1,971 in the U.S. compared to an industry average increase of $506, in the first quarter.
  • Ford has seen smaller profits in Europe and Asia but lost money in South America, Africa, and the Middle East.
  • Ford’s revenue climbed 4 percent to $39 billion in the first quarter. Its automotive revenue was $35.2 billion, beating the forecast of $34.2 billion.
  • Ford shares gained 2.1 percent to $11.84 in pre-market trading.

Another concern is coming from rating agencies that have warned of worsening credit concerns. Millions of nearly-new leased vehicles are due to flood the market over the next couple of years will depress used-car values and hurt the U.S. automakers’ sales.

Auto debt is another big concern for the industry as a whole, and the rate of car loan delinquencies in Q4 reached its highest point in that quarter since 2009 according to TransUnion, but that doesn’t seem to stop the solidness of auto loans being granted. Outside of banks, autos are the most rate dependent business, and the long-term effects will be felt in auto sales and manufacturing because of the interest rate changes.

So, it looks as though the road may be a bumpy one, with the lowest profits coming in the third quarter due to scheduled plant closures, and the rising cost of steel and other materials. Quality issues will need to be addressed to avoid recalls that are costing the company, and Ford is already forecasting a smooth transition on these improvements.

TSC Ford Specialist is a genuine and loyal company that cares about the vehicles you drive, just as the Ford company does. So, when Ford beats forecasts, but profit fell in Q1, that’s a lesson we can all learn. Ford has gained a reputation and following like no other automaker; we are proud of Ford. Stop by today and visit us at TSC Ford Specialist for a quick tune up, regularly scheduled maintenance or for some interesting insight as to where our Ford vehicles will be heading in the future.

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