Ford profit beats forecasts on record North America margins
Ford Motor Co on Tuesday posted a third-quarter profit that trounced expectations due to higher vehicle prices worldwide and record-high profit margins of 12 percent in North America.
The No. 2 U.S. automaker posted an operating profit of $2.2 billion, or 40 cents per share, beating the average estimate of 30 cents per share, according to Thomson Reuters I/B/E/S.
Third quarter revenue fell 3 percent to $32.1 billion, better than the $30.9 billion expected by analysts. Net income in the quarter was about $1.6 billion, or 41 cents a share, on par with results from last year.
Worldwide, Ford earned $800 million more in pricing compared to last year. Half of the pricing increase came from North America, where Ford earned more than $2 billion and posted margins over 10 percent for the third quarter in a row.
"To me, the story isn't just the results in the quarter, but the consistency of the results," Chief Financial Officer Bob Shanks told reporters.
Ford expects to U.S. auto sales will be 14.7 million this year. Ford's strength in North America has offset a sharp industry downturn in Europe and its lagging position in growth markets in Asia, especially China.
In the third quarter, Ford earned about $2.3 billion in North America and saw operating margin of 12 percent, a record for the region. Contribution costs, which includes the cost of commodity hedging, fell by $500 million.
"Twelve percent segment margins is just insane," said Jefferies analyst Peter Nesvold, who has a "buy" rating on Ford. He added: "It is hard to believe that any OEM can sustain 12 percent segment margins over the long term."
In Europe, Ford lost $468 million in Europe, where auto sales are at their lowest level in nearly 20 years.
Ford expects to lose at least $3 billion in Europe over the next two years, including at least $1.5 billion this year. In the first nine months of 2012, Ford lost a little more than $1 billion in the region.
Last week, Ford announced three plant closures in Europe to cut costs by as much as $500 million and signaled a willingness to do more if needed.
Ford earned $9 million in South America. It also $45 million in Asia Pacific and Africa, the first profit for the region since the second quarter of 2011. (Reporting By Deepa Seetharaman and Ben Klayman; Editing by Alden Bentley)