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Ford Seen Boosting 2017 Net Profit As Lower Tax Rate Fuels Ford Beat In Second Quarter

Ford Seen Boosting 2017 Net Profit As Lower Tax Rate Fuels Ford Beat In Second Quarter
Shares of Ford Motor Co went down 2 percent after the car maker forecast that a slightly lower 2017 pre-tax profit during its quarterly reporting where the company reported a better-than-expected quarterly net profit due to a lower tax rate and increased U.S. sales of more-profitable pickup trucks.
The value of its unsold vehicles rose as Ford leaned heavily on consumer discounts during the quarter against a backdrop of declining sales for the U.S. auto industry. Compared to the figures of 2016, its full-year automotive operating margin and cash flow would be lower, Ford warned.
However, a reduced tax rate would boost its full-year net profit, the No. 2 U.S. automaker said. Since Ford ousted his predecessor in late May and elected him to the top spot, the results are the first for Chief Executive Jim Hackett.
Within his first 100 days, a broad-reaching review of Ford's operations was promised by Hackett.
High supplies of unsold vehicles and the high discounts that Ford and other automakers are relying on to sell cars are getting some analysts concerned.
With 8,000 of that coming in the U.S. market, Ford's global sales were down 43,000 vehicles in the quarter. Due to rising commodity costs and engineering expenses, its full-year margin in North America would be lower than in 2016, Ford said.
Rival General Motors Co promised to scale back production to cut its burgeoning inventories and earlier on Tuesday reported a better-than-expected quarterly profit, helped by cost-cutting.
As Ford pulls forward deferred tax losses from outside the United States and could be affected by U.S. market conditions, Ford’s Chief Financial Officer Bob Shanks said this would be largely due to a 2017 tax rate of 15 percent.
After a record of $10.4 billion in 2016, Ford's pre-tax profit would be slightly lower than the $9 billion Ford has previously forecast, Shanks said.
Stripping out the impact of the lower tax rate, the midpoint of Ford's full-year earnings outlook is below analyst expectations, Buckingham Research Group analyst Joseph Amaturo wrote in a research note for clients.
"We recommend investors remain on the sidelines given our concerns for lower U.S. industry volumes... and continued pricing pressure we expect for the back half of the year, which likely puts profitability under pressure," he wrote.
Ford shares were down 25 cents or 2.3 percent at $11.02.
Plans to build the next generation of its compact Focus model in South America have bene cancelled by the company, Ford's CFO said. It would move production of the Focus to China from Mexico for the North American market, Ford announced last month.
Up from just under $2 billion, or 49 cents per share, a year earlier, the company reported second-quarter net income of $2.04 billion, or 51 cents per share. the No. 2 U.S. automaker reported earnings per share of 56 cents, excluding one-time items, and on that basis analysts, on average, looked for 43 cents. 
From $39.5 billion last quarter, revenue for the quarter rose to $39.9 billion.

Christopher J. Mitchell

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