Ford Motor Company (F) earnings preview: Falling sales point to weak Q3

Ford Motor Company (NYSE: F) came under attack from President Trump for not supporting the rollback of fuel efficiency rules a few weeks ago, at a time when it has been grappling with operational issues and weakening sales. Adding to the car maker’s woes, Moody’s downgraded its credit rating to junk last month, citing a potential liquidity crisis from the  large-scale reorganization program.

Of late, Ford’s overall performance has been influenced by shipments in the Chinese market, where sales grew 48% in the second quarter. This time, the bad news is that China sales declined about 30%, according to initial estimates. Also, the lingering trade war concerns and uncertainties in the global economy dampen the company’s China hopes.

Sales Falter

In the US, total vehicle sales dropped about 5% in the third quarter, hurt by the ongoing revision of product portfolio. In the local market, the demand for pickup trucks remained stable – the only business segment that recorded  growth. Meanwhile, Ford Europe emerged the best performer, registering a 3% sales growth aided by a marked increase in passenger vehicle sales.

Also see: 2019 is a year of strategic partnerships for Ford

The strength of pickup trucks will not be sufficient to overcome the weakness in the other segments, especially when labor costs and other operating expenses remain high. Moreover, the costly restructuring program will continue to to eat into the company’s profits in the near term.

Weak Outlook

Taking a cue from the overall weakness, market watchers predict that Ford will report a 10% decline in earnings to $0.29 per share when it reports September-quarter results on Wednesday after the market’s close. Sales are seen falling 2% year-on-year to $33.98 billion. There is apprehension that the actual result might be more disappointing.

Q2 Outcome

In the second quarter, an improvement in pricing more than offset the muted sales and pushed up earnings by 4% to $0.28 per share. Revenues were almost flat at $38.8 billion. The results missed the estimates as the ongoing global redesign and restructuring activities weighed on performance.

Others in Line 

General Motors (GM) will be publishing its third-quarter results on October 29 before the opening bell, even as the auto giant struggles to find a resolution to the workers’ strike. Among others, electric car giant Tesla (TSLA) will be unveiling the numbers for its most recent quarter on Wednesday.

Related: Ford Q2 2019 Earnings Conference Call Transcript

After several ups and downs, Ford’s stock on Monday traded close to the levels seen a year earlier. It is yet to recover from the losses that followed the dismal second-quarter report. The shares gained 9% since the beginning of the year.

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