Ford Q3 profit jumps 63% as truck sales rise

Editor's note: An earlier version of this story overstated Ford's year-ago profit in Europe. The correct profit figure was $138 million.

DETROIT -- Ford Motor Co. on Thursday said its third-quarter net income rose 63 percent to $1.6 billion, helped by foreign tax credits and strong light-truck sales in North America.

Ford's revenue, pretax profit and operating margin all increased in what CFO Bob Shanks called a more balanced performance than recent quarters. Ford's adjusted pre-tax profit climbed 40 percent from a year ago to $2 billion, while revenue inched up 1 percent to $36.5 billion.

Its earnings were equivalent to 39 cents per share, 6 cents better than analysts' estimates in Jim Hackett's first full quarter as the company's CEO.

"This quarter demonstrates that our team's focus on fitness is showing early promise," Hackett said in a statement. "But we also know that we must accelerate that progress in the near term."

Ford's profits were driven by North America, where it made a $1.7 billion pretax profit, up 31 percent from the same period in 2016. Its profit margin in the region jumped to 8.1 percent from 5.8 percent a year earlier.

International results

It posted lower results in Europe but performed better in the rest of the world, including record earnings in its Asia Pacific region.

Ford attributed an $86 million loss in Europe, down from a $138 million profit previously, to the United Kingdom's vote to leave the European Union and costs related to launching a redesigned Fiesta sedan. It was Ford’s first quarterly loss there since the first quarter of 2015, although the company said it still expects Europe to be profitable both in the fourth quarter and for the full year.

Ford lost $158 million in South America, about half as much as it did a year ago, and $60 million in its Middle East and Africa region, a $92 million improvement.

Pretax profits in Asia Pacific more doubled to $289 million. Most of that growth was in areas outside of China.

Ford Credit contributed $600 million in profits, a 5.8 percent increase.

The automaker said it expects full-year earnings to come in between $1.75 and $1.85 per share. That is the top half of the range it had given previously.

Ford, in anticipation of corporate tax-reform efforts by Congress and President Donald Trump, brought $266 million in foreign tax credits back onto its U.S. balance sheet, continuing a planning practice it started in the second quarter.

Wall Street apathy

Ford’s stock continues to be met largely with apathy on Wall Street. The shares rose 1.9 percent to close the day at $12.27. Hackett on Oct. 3 met with Wall Street investors promising to redirect a third of the company's internal-combustion engine expenditures to vehicle electrification and cut costs by $14 billion.

CFO Bob Shanks said the results show the company is very healthy.

“This is a company that has delivered value and created value over the last seven years,” Shanks told reporters at Ford’s headquarters. “We’ve delivered consistently strong results, we’ve delivered healthy margins and we’ve delivered a lot of positive cash flow and we’ve given back by the end of this year over $15 billion dollars to shareholders. As we move forward, we’re driven to create value and we’re going to strengthen and make more fit the traditional part of the biz and we have a really good plan around autonomous vehicles and EVs.”

F-series sales rose 14 percent in the quarter, and Ford was able to post strong numbers despite selling fewer than 1,000 Expeditions and Lincoln Navigators in the quarter as it prepares to launch redesigned models of both high-profit SUVs. It sold more than 19,000 of the two nameplates in the same period last year.

The F-series’ average transaction price rose $2,500 in the quarter to $45,400.

“It’s one of those gifts that keeps on giving for us,” Hackett said.

2018 outlook

Hackett and Shanks declined to offer any financial guidance on 2018, although Hackett insinuated that the company would soon give more specifics on some planned cost-cutting measures and mobility ventures. 

“There are a number of things…we’re working really hard to conceptualize and imagine the implications of,” he said. “There are real things coming from us about that strategy.”

He said Ford would bring autonomous vehicles to a test market next year but didn’t say where or how many vehicles would be involved.

Hackett, when asked if Ford might try to raise its valuation by spinning off its Smart Mobility subsidiary, which he led before being named CEO, said Ford was not ready to even consider such a move.

"It's got to deliver on its promise,” he said. “We've had a lot of good things started, but it isn't at that scale yet."