DETROIT — Ford reported third-quarter earnings of $1.9 billion — more than double its year-ago results — evidence that the automaker will make good on promises of a strong second half of the year armed with full inventories of some of its most profitable vehicles.
Earnings more than doubled the $835 million reported in the same quarter a year ago when sales and profits in North America felt the short-term impact of an aggressive year of product launches.
Tuesday’s results show pretax profits hit a record $2.7 billion, also more than double last year’s results, and the credit goes to North American operations, which also notched earnings of $2.7 billion.
Revenue for the quarter rose 9 percent to $38.1 billion as the company sold 7 percent more vehicles globally and increased share to 7.6 percent.
“It’s an outstanding quarter with records across various parts of the operation,” said Bob Shanks, chief financial officer.
But because of a higher tax rate than the one used by analysts, the results were off Wall Street estimates by a penny and the market reflected that disappointment with Ford stock down 4.5 percent to $14.97 in trading midday Tuesday.
CEO Mark Fields told investors in 2014 that the record 24 new vehicle launches — including the F-150, Mustang and Edge and 13 others in North America — would pay dividends in 2015 which would be a “breakthrough year.”
“‘The Ford team delivered an outstanding quarter with record third quarter profit, best quarter ever for North America, higher wholesales, higher revenue, higher market share and improved margin. We are delivering a breakthrough year,” Fields said in a statement Tuesday.
F-150 now rolling
With stocks of the F-150 pickup and other important vehicles back to normal levels, Ford is expected to produce profits, not excuses, in the second half of the year.
“With the F-150 plants now operating at full speed, Ford has the right products available to meet this demand,” said David Kudla, CEO and chief investment strategist of Mainstay Capital Management. “Sales should continue on a swift pace and add to the bottom line into 2016.”
North America reported its best quarter with pretax profits of $2.7 billion, up 128 percent from $1.4 billion last year. The profit margin grew to 11.3 percent from 7.1 percent in 2014 which was one of the lowest for the quarter in years.
This was the first quarter that Ford had full stocks of the F-150. F-Series pickups have an average transaction price of $42,000 which is $2,000 higher than a year ago. Fields said F-Series sales for the quarter were the best in nine years.
“The F-150 margins are very, very profitable,” Shanks said.
The fourth quarter should also be strong but will see a seasonal dip due to material costs. In addition, if there are signing bonuses as part of a new UAW union contract, it will be reflected in the quarter.
“We feel really good about where we’re heading in the fourth quarter and into next year,” Fields said.
Through the first nine months, Ford made $7 billion in pre-tax profits which already exceeds the 2014 total. On the cost side, most of the product launches for this year are done, with 14 of 16 completed.
Ford is inching closer to the break even point in Europe with third-quarter losses of $182 million, an improvement on $439 million a year ago and the best result since 2009. Despite the sluggish market, Ford stuck to its plan to introduce 25 new products from the end of 2012 to the end of this year, including the new Mustang and a number of performance vehicles as well as mainstays such as the Mondeo (Fusion), Kuga (Escape) and its fleet of commercial vehicles. Shanks would not say if Ford will break even in 2016.
Losses in South America amounted to $163 million, compared with $170 million a year ago, and there are no signs of improvement in a region wracked by a recession and weak currencies, Shanks said. He is pleased that Ford improved its losses even though economic conditions are worse.
Growth continues in Asia Pacific where Ford earned $20 million and is expecting a fourth-quarter record with increased capacity. In China, Ford has gone from a come-from-behind player to the fifth largest automaker and plans to invest $1.8 billion over the next five years to expand research and development of hybrids and electric vehicles.
Guidance for the full year is unchanged at $8.5 billion to $9.5 billion in pretax profits, Shanks said.
Last week General Motors reported third-quarter earnings of $1.4 billion.