Shares in Ford Motor Co (NYSE:F) took a steep dive on Wednesday as investors soured on a disappointing profit outlook for 2018 and statements that the No. 2 U.S. automaker’s turnaround plans will take years to bear fruit.
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In afternoon trading, Ford shares were down more than 7 percent, the largest intraday drop for the company’s stock since July 2016.
At an investor conference in Detroit late Tuesday, Ford provided estimated profits for 2017 and a 2018 outlook that lagged Wall Street expectations.
The company blamed the disappointing forecast on higher costs for steel, aluminum and other metals, as well as currency volatility, which it said could cost the U.S. automaker $1.6 billion in 2018.
Ford said cost-cutting actions were underway and significant benefits would come “in 2020 and later.”
The forecast came the same day that Detroit rival General Motors Co (NYSE:GM) provide a better-than-expected earnings outlook for 2018 and said revamped pickup truck models would boost its 2019 results.
Morgan Stanley analyst Adam Jonas said Ford’s turnaround efforts may require a couple of years of negative revisions of about 20 percent each annually in Ford’s profit.
“For a rather impatient market looking for auto opportunities with little risk in 2018, Ford’s outlook presents a challenge,” Jonas said.
Ford said Tuesday its business structure was “out of sync” with its revenue. It plans to cut the number of passenger-car models and develop more trucks and sport utility vehicles focused on profitable niches like rugged off-road models.
In a statement on Wednesday, Ford spokesman Bradley Carroll said those measures “will create sustained value over the long term.”
In a client note Deutsche Bank analyst Rod Lache wrote “Ford’s strategy will take several years to take hold ... and the company will face plenty of risks in the interim.”
“We expect the Street’s overall take will be neutral to negative,” he added.
Morgan Stanley’s Jonas said Ford’s story was vague and unstructured compared with GM, which has a product mix concentrated on hotter segments and has communicated better on newer ventures into self-driving cars and ride-sharing.
By Tuesday’s close, Ford’s stock had risen 3.7 percent in the past 12 months, underperforming an 18.3 percent increase in GM’s shares. The Dow Jones U.S. Automobiles and Parts index .DJUSAP increased about 22 percent in that period.
Ford will report fourth-quarter results after markets close on Jan. 24, while GM will report Feb. 6.
Barclays analyst Brian Johnson wrote that the presentation was a reminder that it will take Ford time to develop electric vehicles and self-driving cars and that “we have a long journey ahead.”
In afternoon trading on the New York Stock Exchange, Ford shares were down about 7.3 percent at $12.14.