When is doing better than you thought a bad thing?
When Wall Street doesn’t listen.
Back in June, Ford Motor Co. invited analysts to a question-and-answer session with its CFO, Bob Shanks. Among the details Shanks shared was a forecast that Ford’s tax rate in the third quarter would be 34 percent.
Analysts took this information, applied their proprietary “we know better” formula and projected Ford’s third-quarter tax rate to be 32 percent.
When Ford reported its earnings this morning, its tax rate was 33 percent -- slightly better than it said nearly five months ago, before the quarter had even started.
But analysts were expecting a tax rate of 32 percent -- not the 33 percent that Ford reported or the 34 percent it estimated. This meant Ford, by one single penny per share, MISSED EXPECTATIONS, which is such a terrible crime on Wall Street that Bernie Madoff probably would label Ford a poor investment.
By the way, the results also included a $2.7 billion profit in North America, the best in Ford’s 112-year existence. Not too shabby.
Naturally, Ford shares fell 5 percent when the markets opened today, wiping out two weeks’ worth of steady gains. And that's where the price stayed, closing the day at $14.87.
“Tax rates can go all over the place,” Shanks said today, explaining to reporters why Ford paid less in taxes than it thought but more than analysts had forecast. “It depends on where your results are earned, because tax rates are very different by entity around the world.”
Meanwhile, Ford’s 52,000 factory workers couldn’t care less about corporate tax rates or what some Manhattan bankers think. But posting a record North American profit during UAW contract talks is like opening a box of doughnuts and offering Homer Simpson just one bite.
So while Ford is getting pummeled by investors for missing expectations, union members see a fast-growing pile of money and a golden opportunity to make up for sacrifices they have made over the past decade.
Those sacrifices are part of what helped Ford get from the brink of collapse to the point where Ford can have one of its best quarters ever -- and still get punished over a penny.
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