Ford shares jump after strong truck sales help third-quarter results beat expectations

Key Points
  • Ford shares jumped more than 4 percent Wednesday after the automaker delivered third-quarter results that beat expectations. 
  • The second-largest U.S. automaker continues to benefit from an overall shift in North America away from cars and toward trucks, where it has historically been a strong competitor.
Ford's shift of focus to trucks boosted its profitability, expert says

Ford shares surged on Wednesday after the automaker reported quarterly earnings and revenue that beat analysts' expectations.

Strong sales of trucks in North America helped offset declining sales of passenger cars, and challenges such as higher costs, lower volume, and difficulties in China. But earnings are still down from the same quarter last year.

Shares were up more than 4 percent in after-hours trading.

Here's what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: 29 cents, adjusted, vs. 28 cents expected
  • Automotive Revenue: $34.7 billion vs. $33.3 billion expected

The results come during a challenging time for the automaker, which is very much in the middle of a turnaround. Shares of Ford have fallen more than 30 percent since the beginning of the year. Materials costs have risen and tariffs have already cost the company at least $1 billion.

Ford said third-quarter net income fell to $1 billion, or 25 cents per share, from $1.6 billion, or 39 cents per share a year earlier. Excluding items, Ford earned 29 cents per share, beating the 28 cents per share expected by analysts surveyed by Refinitiv.

Total revenues rose nearly 3 percent to $37.6 billion. Its automotive revenue was $34.7 billion, ahead of the $33.3 billion analysts were expecting.

The second-largest U.S. automaker continues to benefit from a relentless consumer shift toward sport utility vehicles and trucks in North America, Ford's strongest market. Ford said its F-Series line of full-sized pickup trucks gained market share, and the Super Duty line of trucks saw record high transaction prices.

Ford beats earnings, revenue expectations

"The shift to trucks is really the driver to profitability and the margins," said Kelley Blue Book senior managing editor Matt DeLorenzo said on CNBC's Closing Bell. "Ford is pretty well positioned right now with their current product mix. The car decision right now won't hurt them much in the short term. We'll have to see where the market goes in the longer term."

But it lost market share in every region where it sells vehicles. It continues to struggle internationally, though it lost less money in those markets than it did in the second quarter.

Revenues were up in Europe by about $500 million over the same quarter last year, but were down in South America, the Middle East and Africa, and Asia.

The Ford Credit business had a strong quarter, the company said.

"This quarter shows that our business remains very strong in key areas," said CEO Jim Hackett. "We continue to make progress on our efforts to redesign Ford to be more competitively fit, disciplined in capital allocations and nimble enough to win in a fast-changing world."

Ford continues to back its prior forecast, which calls for adjusted full-year earnings of $1.30 to $1.50 per share. It said cash flow for the year will be positive, but lower than it was in 2017.

Previously, the company said it will spend $11 billion on restructuring, but some investors say Ford has not released enough details and is not giving the appearance that it is taking decisive action.For example, the company said on Oct. 5 it plans to make cuts to its salaried workforce of 70,000 people, but it does not yet know how many jobs are at risk and will share more details in the second quarter of 2019.

During a call with analysts, Hackett said he understands the frustration over the lack of clarity, but said Ford has to move cautiously. Although it may not be apparent to those outside the company, Ford has been making progress in formulating a turnaround plan.

Separately, Ford said it expects to continue to pay its regular dividend. Morgan Stanley analyst Adam Jonas recently downgraded the stock from a buy to neutral, and said Ford's cash flow is under pressure and its dividend may be at risk.

"We don't know how we've lost control of the way that has been projected, but we have been consistent, saying that we plan to pay the regular dividend in this five-year plan," Hackett said.