The Strategist

Ford shows unexpected profit

01/25/2018 - 14:23

Last night, the American auto concern Ford presented the results of its activities for the fourth quarter and all of 2017. The company's profit grew by 65%, but the reaction of the stock market turned out to be rather cool due to the fact that the company showed a slowdown in sales growth. Earlier, the company's management admitted that there are not so many reasons for optimism against the background of the current decline of the American car market.

JD Hancock via flickr
JD Hancock via flickr
According to Ford's reports, the company's revenue for the past year was $ 156.8 billion, which is 4% more than a year earlier, and net profit is $ 7.6 billion, which is 65% more than in 2016. However, investors responded to the company's annual report very restrainedly - after the publication of the results of quotes the company dropped by almost 1%. Analysts explain this reaction by the fact that the company itself previously warned about the deterioration of the situation. In mid-January, Ford said that revenue could fall to $ 1.45-1.7 per share in the current year. The company explained this by the influence of higher raw material costs and rising costs. Financial director of the company Bob Shanks explained at a conference for investors that "we are not completely satisfied with our activities" in such conditions. Yesterday, presenting the results for the year, the management of Ford confirmed its fears. "We now need to tighten up our physical form, regardless of what awaits us in the future," Mr. Shanks said.

Analysts saw signs of deterioration of the situation in the reporting itself. The operating profitability of the company's automotive operations in the fourth quarter decreased to 3.7% compared with 5.7% a year earlier. In North America, operating profitability for the year decreased by 1.7% - from 8.5% to 6.8%, in Europe - from 2.3% in 2016 to 0.7% in 2017. In addition, in the US, sales of new cars Ford dropped last year by 1.8% - this is the first decline in sales since 2009. "The moment of truth has arrived," Morgan Stanley analyst Adam Jonas said at a presentation for investors. "It's time to ask when we learn about the company's plans to improve its "physical form." But the company does not want to talk. That is the problem. How long shall we wait? "

The worsening of the market situation is explained by the general slowdown of the American car market last year, which occurred after several years of growth. As a result of 2017, sales of new cars in the US amounted to 17.2 million, which is 2% less than a year earlier, and is the first decline since 2009. That's why not only Ford, but also the largest American automaker General Motors released the alarming forecasts. In mid-January, GM warned that its profits for the first time in five years will not show growth in 2018, including because of the slowdown of the American car market.