Ford Earnings Saved by Higher Prices, Truck Sales

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Ford Motor Co. (NYSE: F) reported fourth-quarter and full-year 2018 results after markets closed Wednesday. For the quarter, the automaker posted adjusted diluted earnings per share (EPS) of $0.30 on revenues of $41.8 billion. In the same period a year ago, the company reported EPS of $0.39 on revenues of $38.5 billion. Analysts were looking for EPS of $0.32 and revenues of $37.01 billion for the most recent period.

For the full year, Ford’s adjusted EPS totaled $1.30 on revenue of $160.3 billion, compared with 2017 EPS of $1.78 and revenue of $156.8 billion. Consensus estimates called for EPS of $1.33 and revenue of $146.65 billion. Auto sales totaled $148.29 billion for 2018, up by $2.64 billion (1.8%) year over year. GAAP EPS dropped from $1.93 to $0.92.

In the fourth quarter, revenue rose by 1%, but all other financial metrics were lower: net income dipped 2.6% compared with the fourth quarter of 2017 for a net loss of $100 million, net income margin fell 6.4%, diluted GAAP EPS fell by $0.66 and cash flows from operations dipped by $1.8 billion to $1.4 billion.

North American pretax income in the fourth quarter rose by $200 million to $2 billion, and revenue rose by $1.7 billion to $25.8 billion. The company attributed the increases to “healthy improvement in market factors due to favorable mix and higher net pricing.” Translation: We sold more than 900,000 F-Series pickups in North America. Globally, Ford sold more than 1 million F-Series trucks in 2018

Weaker quarterly performance was blamed on poor performance in China and Europe, but that should have been no surprise. The writing has been on the wall for months. Unit sales fell by 37% in China last year and by 3.2% in Europe. Even North American sales were lower, although pretax earnings of $1.96 billion carried the company to a quarterly total of $1.13 billion worldwide.

CEO Jim Hackett said:

We have consistently laid the foundation for the global redesign of our business, clearly investing to sharpen our competitiveness so we can better serve customers and invest for the future. Ford enters 2019 with a clear vision, a solid plan, and we are now in execution mode.

Ford did not publish a forecast for 2019 but did reiterate longer-term targets for a pretax margin of 8% or better, a return on invested capital in the high teens, and an adjusted debt to EBITDA ratio of less than 2.5%. In a preview of 2018 results released a week ago, Ford also declined to provide a forecast for 2019.

Analysts have forecast adjusted EPS for the first quarter at $0.28 on revenue of $37.66 billion. For the full year, the consensus estimates call for EPS of $1.30 on revenue of $145.45 billion.

In premarket trading Thursday, shares were up two cents at $8.36, in a 52-week range of $7.41 to $12.15. The consensus 12-month price target on the stock was $9.892 before the earnings report was released. The dividend yield on the stock is 7.19%.

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