Ford has reported higher-than-expected quarterly results as earnings in its core North American market fell less steeply than Wall Street expected, but declining vehicle prices there raised concerns about 2014.
The second largest US automaker also affirmed the 2014 profit outlook it presented to investors last month. Ford has described 2014 as a transition year that will test the strength of Chief Executive Officer Alan Mulally’s team and the company’s restructuring since he took over in 2006.
Guggenheim Securities analyst Matthew Stover said Ford's first quarterly drop in North American vehicle pricing in five years was ominous.
"It sort of foreshadows what we will see in 2014," he said. "North America is going through a churn, and international operations are not going to be strong enough to offset that."
Ford said last month that vehicle pricing in the US market would be “slightly unfavorable” in 2014. That combined with the cost of introducing new vehicles and a deteriorating Venezuelan economy would dent its profit this year, the company said.
The news at the time sent Ford's shares to their biggest one-day percentage drop in more than two years. However, the stock regained ground after Mulally quashed speculation earlier this month that he would leave Ford for the top job at Microsoft. He has emphasised that he remains engaged in the company's day-to-day operations as well as setting long-term strategy.
Ford’s net income in the fourth quarter rose to $3 billion, or 74 cents a share, from almost $1.6 billion, or 40 cents a share, a year earlier.
The results included a $2.1 billion gain from the addition of deferred tax assets to the balance sheet, as well as charges of $311 million for last year's pension buyouts and layoffs in Europe. Revenue rose 4 per cent to $37.6 billion, above analysts' estimates of $35.17 billion.
In North America, Ford’s pretax earnings were $1.7 billion, a decline of $200 million, as vehicle pricing fell for the first time in five years due to increased competition.
Citi analyst Itay Michaeli said the pricing declines for the industry tended to hit small and mid-size cars and small crossover vehicles. However, pricing remains strong for larger SUVs and pickup trucks for now, he added.
Ford reported a wider-than-expected loss of $126 million for South America, compared with a year-earlier profit. Its $571 million loss in Europe, though smaller than the previous year, was still wider than analysts had expected. Earnings in Asia Pacific Africa surged more than 170 per cent to $106 million.
Ford’s 2013 pretax profit of $8.57 billion was the second-highest in the last decade, trailing only 2011’s $8.76 billion.
On Tuesday, Ford said it still expected a global pretax profit this year of between $7 billion and $8 billion, with lower auto operating margins. The company has said 2014 will be the busiest launch year in its 111-year history, with plans to introduce 23 new vehicles globally, including 16 in North America.
- Reuters