Car maker presents gloomy profit picture and posted preliminary 2017 numbers that were below consensus
Shares of Ford Motor Co. ended at their lowest in nearly two months Wednesday, after the car maker painted a gloomy picture of its profit this year and posted preliminary 2017 profit that fell short.
Ford F, -0.90% said late Tuesday it expects lower profit this year as higher commodity costs and unfavorable exchange rates chip away at gains from the company’s cost-cutting moves and continued demand for its trucks.
The stock fell 7%, the lowest close since Nov. 27 and its largest percentage decline since July 28, 2016. It was the worst performer in the S&P 500 index SPX, -0.16% on Wednesday.
Ford shares are down 3.4% in the past 12 months, versus gains of 24% for the S&P 500 index and of 32% for the Dow Jones Industrial Average DJIA, -0.37%
Ford said it expects 2018 adjusted income to come in a range of $1.45 a share to $1.70 a share.
The company announced preliminary 2017 adjusted net income of $1.78 a share, below the FactSet consensus of $1.82.
The FactSet expectations for 2018 are around $1.58 a share.
“We continue to believe in the short-to-medium term the (Ford) narrative is about protecting the core business while ‘emphasizing’ autonomy and electrification,” analysts at Consumer Edge said in a note.
Ford reaffirmed its commitment to electric vehicles and said it planned to increase investments in that area to $11 billion by 2022 and develop 40 electric vehicles globally, including 16 full battery electric vehicles by 2022 and an electric SUV with at least a 300-mile range by 2020.
Ford’s guidance came on the heels of an outlook from General Motors Co. GM, -0.39% earlier on Tuesday.
GM forecast 2017 profits at the higher end of previous expectations and said it expects “strong earnings” this year. GM shares on Tuesday shot up to their best level in nearly three months before a late-session downturn for major indexes whittled down their gains.
GM delivered “a solid presentation,” and its implied 2018 EPS guidance around $6.50 will likely lead Wall Street to revise its expectations for GM higher, analysts at Evercore ISI said in a note.
“On the other hand, Ford’s guidance was on the light side,” and likely to lead to negative revisions, the analysts said.
“Given positive earnings revisions at GM, and the reverse at Ford, we continue to prefer GM over Ford, and continue to recommend a pair trade.”
Fiat Chrysler Automobiles NV FCAU, +1.21% FCA, +1.86% “remains our top-pick” among U.S. car makers, the analysts said.
Analysts on average rate GM shares as a buy, with a target price of $47.56 a share, according to FactSet. That represents 8% upside over Wednesday’s prices.
Analysts on average have a hold rating on Ford with an average stock price target of $12.92, according to FactSet, which represents 6% upside to current levels. The analysts surveyed by FactSet rate Fiat Chrysler shares hold with a target price of $19.82, or 5% above current levels.