Ford raised its earnings estimates for the second time this year on Wednesday on lower-than-expected credit losses.
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According to Reuters, Ford, which has been sacrificing lower-margin sales in a bid to improve profits, said it now expects earnings in the range of $US1.65 to $1.75 per share this year compared with a previous estimate of $1.50 to $1.60 a share.
For the second quarter, Ford reportedly said it sees earnings before special items ranging from 45 to 50 cents per share, up from its previous forecast for earnings of 30 cents to 35 cents.
“The increase primarily reflects the strong performance of the company’s Financial Services Sector, which has benefited from lower than anticipated credit losses,” the company said in a statement cited by the news agency.
It also reportedly cited improved values for used vehicles and those coming off leases and continuing low interest rates – higher used car values lift margins when vehicles coming off lease are sold in an auction.
Reuters said Ford’s first increase in its full-year profit forecast came after it posted first-quarter earnings that more than doubled to $1.95 billion, or 94 cents a share, far exceeding Wall Street estimates – the first-quarter results also beat those at rival General Motors for the first time in three years.
Ford, which has been backing away from low-margin fleet and daily-rental sales, reportedly said last month it was on track to achieve a mid-decade target of $7 billion in annual pretax profits.
According to Reuters, Deutsche Bank Securities analyst Rod Lache questioned how long Ford could sustain its pursuit of higher margins, saying the strategy has eroded its market share – Ford also offers fewer incentives on average as compared with No. 1 carmaker General Motors.
“The strategy is risky,” Lache reportedly said in a research note on Wednesday, adding: “In the intermediate to long term we don’t believe that Ford’s premium pricing will be sustainable.”
In its revised estimate on Wednesday, Ford reportedly reiterated that it expected special items, from a European restructuring and the sale of non-core businesses, to cut full-year earnings by 7 cents to 9 cents per share.
Analysts on an average expect Ford to earn $1.85 per share this year, according to Reuters Estimates.
