Demand for trucks remains solid, but U.S. auto market as a whole is downshifting
Ford Motor Co.'s first-quarter profit fell 35% from a year earlier amid higher costs and weaker U.S. sales, sending the stock down 1.7% in early afternoon trading.
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The No. 2 U.S. auto maker on Thursday reported profit of $1.6 billion, down from $2.5 billion in 2016's first period, when strong demand for a newly redesigned F-150 pickup truck helped Ford post its best quarterly operating profit in history.
Adjusted earnings per share were 39 cents in the latest quarter, beating analysts' consensus of 36 cents. Analysts cited stronger-than-expected earnings in North America and at Ford Credit, the company's financing arm.
"The results were solid, but it was a tough comparison" to last year's first quarter, Ford Chief Financial Officer Bob Shanks said on Thursday.
The Dearborn, Mich., auto maker faced headwinds at home and abroad with lower sales in China, an unfavorable exchange-rate impact in Europe because of Brexit and a tougher market in the U.S., where new-car demand is cooling after seven years of uninterrupted growth.
Mr. Shanks described the just-ended quarter as likely Ford's "toughest" for this year with results expected to be flat to better "in aggregate" over the remaining three quarters.
Revenue for the first quarter rose 4% to $39.1 billion, driven by a favorable mix of pickup trucks and sport-utility vehicles.
Ford is coming off one of its most profitable periods in history with its North American business benefiting from two years of record sales growth for the U.S. auto industry and surging demand for its highly lucrative trucks and SUVs amid low gasoline prices.
Ford earned $10.4 billion in operating profit last year, though results were down slightly from 2015's record of $10.8 billion.
Company executives are forecasting a leaner profit this year, confirming on Thursday full-year operating guidance of $9 billion.
Ford plans to cut $3 billion in costs this year and expects profit to rebound in 2018, driven by continued strength in the U.S. pickup-truck market, the rollout of two new full-size SUVs and improving results at Ford Credit.
Ford's first-quarter adjusted pretax profit fell 42% to $2.2 billion, dinged by a $295 million recall expense disclosed in March covering nearly a half-million vehicles with fire risks and faulty door latches. This was the second time in less than a year that safety concerns have hurt the bottom line.
Operating profit for Ford's North American business was $2 billion, down 35% from the same period a year earlier.
Margins slipped in the first quarter to 8.3% in the company's core North American business, from a lofty 12.9% a year earlier. While transaction prices were up $1,971 per vehicle on strong demand for Ford's heavy-duty trucks, U.S. sales fell 4% in the first quarter and market share shrank.
Higher interest rates and a steady decline in used-car values are also hurting vehicle affordability among U.S. consumers and making it more difficult for auto makers to continue offering the cheap leases that helped drive U.S. sales.
In Europe, Ford posted a pretax profit of $176 million compared with $434 million a year earlier, with exchange-rate and Brexit headwinds offsetting higher sales volumes.
In Asia Pacific, Ford recorded a $124 million operating profit, down from $220 million, as the auto maker contended with cooling new-car demand and the expiration of a tax subsidy on small-engine vehicles last year.
Ford's operating losses in South America continued, with the auto maker reporting $244 million in red ink, compared with $256 million in last year's first quarter.
Write to Adrienne Roberts at Adrienne.Roberts@wsj.com and Christina Rogers at email@example.com
(END) Dow Jones Newswires
April 28, 2017 02:47 ET (06:47 GMT)