Ford's second quarter profit swells on tax changes
July 26, 2017 09:40 AM
DEARBORN, Mich. (AP) — Ford Motor Co. had a better-than-expected second quarter despite lower sales and upheaval in its executive ranks.
Net income rose 4 percent to $2 billion, thanks in part to a change in the company's tax rate and a strong performance from its credit arm.
Adjusted profits of 56 cents per share easily surpassed Wall Street expectations of 43 cents, according to analysts polled by FactSet. One-time items included a $248 million charge as the company shifted production of the Ford Focus from Mexico to China.
Ford's automotive revenue of $37 billion was in line with Wall Street's expectations. Total revenue rose 1 percent to $39.85 billion.
There were big changes over the past three months for the automaker, based in Dearborn, Michigan. In May, Ford abruptly replaced CEO Mark Fields with Jim Hackett, a company board member who had been leading Ford's mobility unit. The former CEO of office furniture company Steelcase Inc. is in the midst of a 100-day review of operations at the company.
"We're all energized and excited about what we're finding," Chief Financial Officer Bob Shanks said.
Hackett, seeking to accelerate decisions at the century-old company, has shuffled Ford's management team. Shanks said the company is adjusting its plans and expects to invest more in SUVs, commercial vehicles, mobility and other growth areas.
The elevated performance in the second quarter was due mostly to a lowering of the company's corporate tax rate, from 30 percent down to 10 percent, Shanks acknowledged. Ford has put some overseas losses back on its books in anticipation of changes in the U.S. corporate tax code, Shanks said. The company expects to have a 15 percent rate this year, but that will return to 30 percent next year.
Ford's shares fell 1.5 percent to $11.10 in premarket trading.
Full-year guidance did shift upward due to the tax change. Ford expects adjusted earnings of $1.65 to $1.85 for the full year, up from its previous guidance of $1.58 per share, Shanks said. Last year Ford earned $1.76 per share. Its automotive revenue will be about equal to its 2016 revenue of $141.5 billion.
It was the best quarter since 2011 for Ford Credit, which is seeing stronger-than-expected auction values for Ford's off-lease vehicles, Shanks said. Ford Credit's revenue rose 7 percent to $2.7 billion in the quarter.
Overall sales fell 3 percent to 1.65 million vehicles. Much of that decrease was due to lower sales of the Fiesta in Europe as the company prepares to launch a new Fiesta, Shanks said.
Ford earned $2.2 billion in North America, its biggest market. That was down 19 percent from the April-June period a year ago as Ford spent more on incentives and commodities, including steel. The company broke even in South America, Europe, the Middle East and Asia.
By DEE-ANN DURBIN
Updated: July 26, 2017 09:40 AM
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