Key Takeaways From Ford Motors’ Q3 2017 Results

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Ford Motor Company (NYSE: F) announced its Q3 2017 results on October 26th and the company beat analyst expectations for both revenue and EPS (earnings per share). Reported revenue was $36.5 billion against expected revenue of around $33 billion and reported EPS of $ 0.39 was higher than the expected number of $0.33. In Q3 2017, the company achieved a cost reduction and has accelerated its plans to introduce smart, connected vehicles in the market.  Below is a summary of the company’s financial performance for Q3 2017:

Lower costs, favorable market factors, and a product mix geared towards more profitable vehicles contributed to the improved profitability in this quarter. The company achieved a 2.3 points gain in operating margin in North America, which contributed towards improved profitability. Improved operating performance and a  lower tax rate were the key drivers behind the more than 60% year on year increase in net income for this quarter.

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Below is a summary of the company’s regional performance in this quarter:

South America remains a challenging market for Ford, however the company expects lower losses compared to last year as the economy recovers. Ford Motors expects profits in Asia to improve compared to 2016 due to low product cost and favorable volume and mix.  While margins in North America are expected to be lower compared to the previous year, net pricing has been favorable year on year for the fourth consecutive quarter due to the strong performance of the F-series.

Going Forward:

  • Based on the strong performance in Q3 2017, Ford Motors has tightened its EPS guidance for 2017 to a range of $1.75 to $1.85, which is in the upper range of its previous guidance.
  • The target for Ford Credit has been raised to above $2 billion.
  • Successful launches of new products, especially the new F-150 and various collaborations such as the ones in India and China and with Lyft in the autonomous vehicles segment, are likely to drive revenues for Ford in the future.

We have a $12 price estimate for Ford’s stock, which is near the current market price.  We will be updating our model for Ford Motors based on the above earnings which can lead to a change in our price estimate for the company.

 

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