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Ford’s Ugly Quarter Fuels Concern About Crown Jewel F-Series

Ford’s Ugly Quarter Fuels Concern About Crown Jewel F-Series

(Bloomberg) -- Ford Motor Co. shares plunged Thursday as Wall Street analysts raised questions about the slow pace of Chief Executive Officer Jim Hackett’s $11 billion turnaround plan, with a crucial redesign of the F-Series pickup looming.

The automaker cut its forecast for 2019 pretax earnings by a half billion dollars on Wednesday, warning of headwinds in the fourth quarter. Those hurdles include higher warranty costs, weaker China sales and higher incentive spending in North America to fend off new competition to the F-Series, among other models.

Ford’s Ugly Quarter Fuels Concern About Crown Jewel F-Series

Next year, Ford will roll out a redesigned F-Series to take on a surging Ram pickup from Fiat Chrysler and a new Chevrolet Silverado from General Motors Co. That changeover will require factory downtime of Ford’s best-selling and most profitable model, just after it bungled the launch of its Explorer sport utility vehicle. It also comes as Hackett’s “Global Redesign” of the business costs billions in cash and fuels credit raters’ fears about execution.

“The issue is that the Global Redesign is still expected to spend $7 billion in cash over coming years, next year Ford’s most important product, F-150, is down with changeover and the dividend still costs $2.4 billion a year,” Joe Spak, an analyst at RBC Capital Markets who rates Ford the equivalent of a hold, wrote in a Thursday note to investors. “Cost savings and international improvement really need to take hold.“

Ford shares pared a decline of as much as 7.2% Thursday -- the biggest drop since July -- and traded down 6.8% to $8.58 as of 2:02 p.m. in New York.

Ford was downgraded to hold, from buy, by Deutsche Bank analyst Emmanuel Rosner, who cited “near-term earnings outlook deterioration” and costs from launching new models such as the F-Series.

“The benefit from its $7 billion restructuring program will likely take longer to materialize than previously expected, and could be more than offset next year by large costs from launches,” wrote Rosner, who lowered his earnings estimates and price target. “We also worry about Ford’s preparedness for an eventual U.S. industry downturn.”

Hold and sell recommendations on Ford stock outnumber buys by 2-to-1, according to Bloomberg data.

To contact the reporter on this story: Keith Naughton in Southfield, Michigan at knaughton3@bloomberg.net

To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, Chester Dawson

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