Ford increases quarterly profit on reduced tax rate
Detroit — On Wednesday, Ford Motor reported a better-than-expected quarterly net profit due to a lower tax rate and increased sales of more profitable pick-up trucks in the US market, with the company saying that the reduced tax rate would boost its full-year profits.
But the number two US vehicle maker also leaned heavily on consumer discounts during the quarter, and the cost of its inventories rose; the company warned that its full-year automotive operating margin and cash flow would be lower than in 2016.
Ford’s results come at a time when the US automotive industry is bracing for a downturn after four consecutive months of declining sales. Analysts are concerned about the high discounts vehicle makers are using to sell their vehicles and high supplies of unsold vehicles.
On Tuesday, rival General Motors reported a better-than-expected quarterly profit helped by cost-cutting, and promised to scale back production to cut its burgeoning inventories in the second half of the year.
Ford said that for the full year it now expects adjusted earnings per share in a range from $1.65 to $1.85, above the $1.51 expected by Wall Street, according to Thomson Reuters.
However, chief financial officer Bob Shanks said this would be largely due to a tax rate of 15% for the year as Ford pulls forward deferred tax losses from outside the US. Wall Street had expected an effective tax rate of 30% for 2017.
The Michigan-based company reported second-quarter net income of $2.04bn, or 51c per share, up from just under $2bn, or 49c per share, a year earlier.
Excluding one-time items, Ford reported earnings per share of 56c and on that basis, analysts, on average, looked for 43c. In pre-market trading, Ford shares were down 2c from Tuesday’s official close at $11.25.