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Ford’s Strong Q1 Performance Sends Its Shares Past The Psychological $10 Mark

Ford’s Strong Q1 Performance Sends Its Shares Past The Psychological $10 Mark
Increased demand for its F-Series pickups and results of the massive cost cuts employed by Ford Motor Co. is now getting reflected in the earnings outlook for the US automaker.  
The company’s adjusted profit was way beyond the average estimate of 26 cents a share of analysts at 44 cents a share for the first quarter of the current fiscal. And despite the company reporting a drop in its automotive revenue to $37.2 billion because of reduced global deliveries to dealers, it was still over the expectations of analysts of $37 billion.
This result prompted a 8 per cent increase in its stock price and surpassed the $10 mark for the first time since August. So far this year, the shares of the company have increased by 23 per cent after a rout of its stocks last year.
Ford’s Chief Financial Officer Bob Shanks, had said told reporters in January that there was “potential” for improvement of earnings this year and the first quarter results have prompted him to say that his conviction about that view had increased. “We were hopeful that we would be improving,” he said at Ford headquarters in Dearborn, Michigan. “We have more confidence in that today.”
The quarterly results also showcase the positive results for the $11 billion overhaul in the company that had been initiated by Chief Executive Officer Jim Hackett who had said the earlier this month that the company is staging turnaround. Strong performance in the United States was a major diver for the earnings beat. The company reported an almost 1 per cent increase in the pretax profit margin rose at 8.7 per cent, which has been driven by increased demand for trucks and SUVs that include the F-Series and Lincoln Navigator.
Some of the cost curtailing measures undertaken at Ford includes shifting focus from traditional sedans towards the higher profit making sport utility vehicles and trucks, shelving thousands of salaried jobs and closing factories. The company is also making investment in billions to develop technologies for electric and self-driving cars. This week the company also announced its decision to invest $500 million in battery-powered truck-maker Rivian.
There would be very fast improvement in performance one the changes which form a portion of the restructuring plans of the company start to have effect, said Ford CFO – Shanks. “It all starts to accumulate,” he said. “It’s like a rolling stone.”
“Ford’s exit from unprofitable businesses -- mainly cars -- and cost cuts to focus on wider-margin commercial trucks overseas is proving the more effective strategy to get Europe and China to sustainable Ebit and North America to 10% pretax margin,” he added.
There was also a warning accompanying the breaking results of the company as voiced by Shanks who said that the first quarter of the current year would potentially be the best quarter for the company for the entire of 2019. This is because the profits would be impacted by expenses of launching the redesigned Explorer and Escape.
“Sentiment has improved, but there’s still some skepticism remaining,” said David Whiston, an analyst with Morningstar in Chicago, who rates Ford a buy. “The old, stale product lineup is getting close to being refreshed in the U.S. and recent disclosures of cuts in Europe and South America are appealing.”

Christopher J. Mitchell

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