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Ford 3Q Earnings Lower, but Still Beat Street Estimates


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Ford Posts Strong Second Quarter Earnings
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By Bernie Woodall and Ben Klayman

DETROIT -- Ford Motor reported Friday a 34 percent drop in third-quarter earnings, and revenue fell due to the cost of introducing the F-150 pickup truck.

Ford, which affirmed its full-year profit outlook, said earnings suffered from lower wholesale vehicle volumes and recall costs, as well as supplier parts shortages. While a strong performance in North America helped push earnings above Wall Street estimates, analysts and investors were not impressed.

"No compelling new reason to either buy or sell the stock," Morgan Stanley (MS) analyst Adam Jonas said in a research note. "On the substance of the results and outlook itself, we don't believe consensus forecasts need to change materially."

Shares of Ford (F) were off 3.3 percent at $13.93 in morning trading.

The launch of the aluminum-bodied F-150 is on track, and Ford has completed about half of 23 global introductions planned this year, it said. The pickup is a key profit driver for the No. 2 U.S. automaker.

A 3 percent drop in third-quarter revenue to $34.9 billion is largely linked to the planned shutdown of the F-150 plant in Dearborn, Michigan. Ford also said wholesale volumes fell by 3 percent, partly due to the parts shortages.

Chief Financial Officer Bob Shanks didn't identify the suppliers or the vehicles affected but said there were four different problems across several North American plants that had been resolved. He said Ford wouldn't recoup all of the lost production in the fourth quarter.

Excluding one-time items, Ford reported earnings of 24 cents a share, which beat expectations of 19 cents from analysts polled by Thomson Reuters I/B/E/S.

Shanks attributed that beat to North American operating results and lower tax rates.

Ford's profit margin of 7.1 percent in North America lagged the 9.5 percent that crosstown rival General Motors (GM) reported Thursday. Excluding recall costs, Ford's margin would have been 10.2 percent.

The last time GM's North American margin was higher than Ford's was the fourth quarter of 2011, according to Barclays.

Higher vehicle prices added nearly $600 million to Ford's earnings, almost half of that derived from North America.

Ford last month warned that its pretax profit this year would be $6 billion, down from a previous forecast of $7 billion to $8 billion, and that recall costs in North America would be $1 billion. About $630 million of those costs came in the third quarter.

Net income fell to $835 million, or 21 cents a share, from $1.27 billion, or 31 cents a share, a year earlier.

Ford continued to lose money in Europe and in South America while being profitable in Asia as well as North America.

The loss in Europe widened to $439 million from $182 million a year ago, mainly due to weakness in Russia.

Ford continued its gains in China, where it reached 4.7 percent market share, its highest yet.


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