Ford skids after disappointing outlook
Ford estimates 2017 earnings per share well below analysts' average expectation
Shares of Ford Motor Co fell seven per cent on Wednesday following a disappointing outlook, underscoring that turnaround plans would take years to bear fruit.
At an investor conference in Detroit late on Tuesday, Ford estimated 2017 earnings per share well below analysts' average expectation, and said 2018 would be lower than the mid-point of average expected earnings for the year.
Morgan Stanley analyst Adam Jonas said the company's revamp efforts may need a couple of years of negative revisions of about 20 per cent each annually in Ford's profit.
"For a rather impatient market looking for auto opportunities with little risk in 2018, Ford's outlook presents a challenge," Jonas said.
Ford said higher costs for steel, aluminum and other metals, as well as currency volatility could cost the company $1.6 billion US in 2018. Cost-cutting actions were under way, the company said, and that it would start to see significant benefits "in 2020 and later".
"Ford's strategy will take several years to take hold ... and the company will face plenty of risks in the interim. We expect the Street's overall take will be neutral to negative," Deutsche Bank analyst Rod Lache wrote in a note.
The No. 2 U.S. automaker said its business structure was "out of sync" with its revenue, and plans to cut the number of passenger-car models and develop more trucks and sport utility vehicles focused on profitable niches like rugged off-road models.
Jonas termed Ford's story a vague, unstructured one compared with larger rival General Motors Co, which shows a more "air tight" message related to growth plans.
He added that GM's product mix is concentrated on hotter segments, and it had done far greater development and communication around newer ventures into self-driving cars and ride-sharing.
Ford shares closed down 92 cents US at $12.18 US on Wednesday on the New York Stock Exchange.
Up to Tuesday's close, Ford's stock had risen 3.7 per cent in the past 12 months, underperforming an 18.3 per cent increase in GM's shares. The Dow Jones U.S. Automobiles and Parts index increased about 22 per cent in the same period.
Ford will report fourth-quarter results after markets close on Jan. 24, while GM will report in early February.