By Claudia Assis, MarketWatch
Expectations 'may have run too hot' ahead of earnings, analyst says
Ford Motor Co. shares fell to their lowest in seven weeks Thursday, after the auto maker's second-quarter earnings disappointed and guidance left investors fearing for the rest of the year.
Ford (F) shares were also on pace for their largest one-day decline since Jan. 17, when they fell 7%. July, off 6% so far, is also shaping up to be the stock's worst month since May, when monthly losses reached 9%.
Ford late Wednesday reported second-quarter earnings that missed profit and revenue expectations. ()
The company's 2019 earnings outlook was also weaker than expected: Ford said it expects full-year adjusted earnings of between $1.20 and $1.35 a share, while analysts polled by FactSet expect adjusted earnings of $1.40 a share.
See also:Tesla stock tanks after company's larger quarterly loss, sales miss ()
Ford's earnings were "acceptable," with some underperformance in its automotive business offset by stronger credit business and while larger corporate expenses drove a bottom-line miss, Deutsche Bank's analyst Emmanuel Rosner said in a note.
The company's 2019 guidance, however, "came in considerably worse," he said. "Management believes the benefits from its restructuring plan are on track, and blamed the weak outlook primarily on large expected launch-related headwinds from changing over some of its main U.S. truck platforms."
Ford's "large launch activity" is to continue in 2020, which could further delay any large improvement in profitability, he said.
"We continue to believe Ford has considerable underappreciated potential from restructuring its global operations over the next few years, but investors may now wait for more visible earnings and cash flow traction, before giving the stock credit for it," Rosner said.
Read more:Ford plans new wave of layoffs, to shed 10% of its workforce by August ()
Second-quarter results were mixed, "but bigger impact is likely new guidance that will cause meaningful revision to 2H19 numbers," analyst Joseph Spak at RBC Capital said. "Meanwhile, less info on assumptions and still no clarity on payback from recent actions could begin to cast doubt on 2020 estimates."
Moreover, investor expectations "may have run too hot" ahead of the earnings, Spak said.
The second quarter was a "back to reality" period for Ford, said analyst Chris McNally at Evercore ISI.
Ford shares rallied in April and rose the most in 10 years () following first-quarter results that beat expectations and fueled investors' optimism on Ford's turnaround plans, which have included layoffs, changes in its South American and European businesses, and all but abandoning sedans in North America in favor of pickup trucks, SUVs, and iconic muscle cars.
Ford shares have gained 26% this year, compared with gains of 20% and 17% for the S&P 500 and Dow Jones Industrial Average.
-Claudia Assis; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
July 25, 2019 11:36 ET (15:36 GMT)
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