Ford shares fall 0.6% to US$15.56 after analyst says softening per-vehicle prices, higher costs, lower earnings may hurt H2, raises 2011 estimate to US$1.29/share, lowers 2012 to US$1.27/share, keeps rating neutral
April 28, 2011
– Shares of Ford Motor Co. declined a bit Wednesday after a Buckingham Research Group analyst raised concerns that deterioration of Ford's strong per-vehicle prices, higher costs and lower earnings from the company's credit arm could cut into second-half profits.
THE OPINION: Ford reported on Tuesday that it made $2.6 billion, or 61 cents per share, in the first quarter, up 22 percent from a year ago, and its best first-quarter performance since 1998. But analyst Joseph Amaturo said in a note to investors that he was concerned about future headwinds cutting into the company's financial results.
Particularly, Amaturo wrote that Ford may have to spend more on incentives such as rebates and low-interest financing, and that could cut into automotive pretax profits. "Although management remains committed to its disciplined pricing strategy, we believe Ford could be forced to become more aggressive with incentive spending to avoid market share losses as well as offset the consumer's additional cost to operate less fuel-efficient vehicles with the rise in gasoline prices," he wrote.
Also, gas prices could cause customers to shift away from more profitable trucks to lower-cost cars, he wrote. He also expects higher commodity costs and lower earnings from Ford Motor Credit Co.
Still, Amaturo kept his "Neutral" rating on the stock but changed his earnings per share estimates for 2011 and 2012. For this year, Amaturo raised his estimate from $1.15 to $1.29 per share, reflecting a better-than-expected first-half performance. But he reduced his 2012 estimate from $1.32 to $1.27 per share.
THE STOCK: Ford shares retreated slightly Wednesday afternoon, falling 10 cents, or 0.6 percent, to $15.56. They have traded in a 52-week range of $9.75 to $18.97.
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