Stock hovers at five-year low after earnings miss, lowered profit expectations
Another trading day, another fiasco for shares of a domestic auto maker.
Ford Motor Co. F, -5.99% stock was on pace for its lowest close in more than five years, off more than 4% on what was also shaping up to be its worst one-day percentage hit since February.
The share movement follows an earnings miss and lowered profit guidance for the auto maker, and comes as Ford, General Motors Co. GM, -2.39% and Fiat Chrysler Automobiles NV FCAU, -1.47% combined shaved about $3 billion from their expected profits this year.
All three auto makers blamed rising raw-materials costs, unfavourable foreign-exchange rates, and softer business in China.
“Lowered financial outlooks from the US OEMs will send a wave of caution across the broader auto space as higher steel prices from tariffs become a real earnings drag,”analysts at CreditSights said in a research note Thursday.
Ford late Wednesday reported second-quarter earnings that missed Wall Street targets despite “solid” results in North America.
Ford earned $1.1 billion, or 27 cents a share, on sales of $38.9 billion in the quarter. Analysts polled by FactSet had expected earnings of 31 cents a share on sales of $39.2 billion. The auto maker lowered its 2018 adjusted earnings guidance to $1.30-$1.50 a share; analysts surveyed by FactSet were expecting adjusted EPS of $1.51 for the year.
Share losses for Ford were steeper as analysts criticized the continued lack of detail about its restructuring plan.
Investors long have complained that Ford was keeping details of its turnaround too close to the vest and have dinged the company for it. That continued to be a problem after earnings.
Ford warned that its restructuring efforts, including steps beyond abandoning the sedan market in North America, could cost as much as $11 billion and stretch over three to five years. Ford also postponed a September investor day.
“For us the biggest issue with Ford as an investment is the lack of clarity” on where the company is going, where the company wants to be, and “whether the company actually feels any urgency around putting in place a strategy and executing it,” analysts at Evercore ISI said in a note Thursday.
“Despite a CEO strategic update last year, a presentation at the Detroit auto show in January, a North American product plan reveal in Q1 and now two lengthy quarterly presentations, in all frankness we are none the wiser,”they said.
Analysts at Consumer Edge echoed that sentiment, saying they noticed “few details or metrics were provided on the conference call in terms of management’s expected return from these restructuring efforts.”
Analysts at Goldman Sachs lowered their 12-month price target on Ford shares to $9 from $10.
“At present, we see persistent headwinds to Ford results,” especially as competition from pickup trucks from GM and Fiat Chrysler looms next year, the analysts said. GM “could see more resilience to earnings into next year with easy comps from launch costs and change-over effects that have hindered mix so far in 2018.”
Shares of Ford have lost 20% this year, contrasting with gains of 6% for the S&P 500 index SPX, -0.30% and 3% for the Dow Jones Industrial Average. DJIA, +0.44% The stock has fallen 10% in the past 12 months, versus gains of 15% and 18% for the S&P and the Dow.