Investors punished Ford yesterday, sending its stock to the lowest level in more than a year, after the nation's second-largest automaker...
DETROIT — Investors punished Ford yesterday, sending its stock to the lowest level in more than a year, after the nation’s second-largest automaker warned that profits will fall short of expectations this year and next.
“In case we thought the many difficulties that have afflicted General Motors in 2005 were unique to that company, Ford made it clear there is trouble brewing in Dearborn too,” Credit Suisse First Boston analyst Chris Ceraso said yesterday in a research note.
Ford shares fell 59 cents, or 5.4 percent, to close at $10.44 in trading yesterday.
Ford lowered its full-year profit forecast Friday to $1.25 to $1.50 per share from $1.75 to $1.95 per share. Analysts surveyed by Thomson Financial had been expecting full-year earnings of $1.64 per share. Ford also said it doesn’t expect to reach its goal of $7 billion in pretax profits by 2006.
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GM shares took an even harder fall last month after the world’s largest automaker lowered its full-year earnings forecast by 80 percent to $1 to $2 per share. GM’s shares fell again yesterday, declining 25 cents to $29.25.
Both automakers blame escalating health-care costs and the high price of steel and crude oil for their continuing problems.
Some analysts also have faulted the companies’ vehicle lineups, such as aging trucks that are having trouble competing with new offerings from Asian automakers.
Fitch Ratings, which revised its outlook on Ford from stable to negative yesterday, said Ford faces significant pricing competition as both U.S. and Asian automakers raise incentives. At the same time, consumer demand for profitable sport-utility vehicles is fading.
Standard & Poor’s also has lowered its outlook on Ford from stable to negative.
Analyst Ceraso said Ford’s U.S. sales, which are down 4 percent for the year, have been a disappointment despite some bright spots such as the brisk-selling Ford Mustang. The company’s luxury division, which includes money-losing Jaguar, has been dragging down profits, he said.
Still, Ceraso retained a neutral rating on Ford. He noted that Ford expects first-quarter earnings to exceed its previous guidance of 25 cents to 35 cents per share. Wall Street analysts expect earnings of 36 cents per share when Ford reports first-quarter results April 20.
Ceraso also says earnings at Ford’s credit division should be higher this year than had been anticipated.
Merrill Lynch analyst John Casesa also retained a neutral rating on Ford.
In a research note yesterday, Casesa said Ford’s revised earnings guidance was expected, but the magnitude of the cut was surprising.
Casesa said Ford will likely slash its second-quarter production plans next week. Ford’s inventory is 16 percent above average, said Casesa, who expects a production cut of around 8 percent between April and June. GM has announced it is cutting second-quarter production by 10 percent.
Casesa said Ford likely won’t see much relief until the second half of the year, especially now that the company will have to follow as GM increases incentive spending.
GM said last week it is reviving a roughly $50 million marketing program that gives consumers a chance to win one of 1,000 GM vehicles.