Ford expects record earnings; Europe profitable
DETROIT -- Ford Motor said it earned a record pretax profit of at least $10.5 billion in 2015 and that it would match or beat that result in 2016.
It also said it would return $1 billion to shareholders in the form of a special 25-cent-per-share dividend, but the news failed to halt a three-month decline in the automaker’s stock price.
“As we close out 2015, we are benefiting from six consecutive years of consistently strong results, and our performance is allowing us to reward our shareholders,” Ford CEO Mark Fields said in a statement on Tuesday.
Fields, speaking to investors and analysts at a Deutsche Bank conference in Detroit, said Ford’s Board of Directors expects to make special dividends an “ongoing element” of the company’s efforts to reward shareholders. He said the amount may vary and that there may be some years with no extra payout.
The dividend brings Ford’s total return to shareholders to $3.5 billion in 2015 and $12.6 billion since 2012.
Shares of Ford, which rose 0.6 percent in regular trading on Tuesday, fell more than 3 percent after hours on news of the profit estimate and special dividend.
The special dividend amounts to 40 percent of Ford’s regular dividends in 2015. The statement said it was prompted by the company’s “robust cash and liquidity levels.”
Ford said it expects to have operating margins of at least 9.5 percent this year in North America, where it posted a record profit in the third quarter of 2015, and that it would be profitable in its Europe, the Middle East and Africa, and Asia Pacific regions.
Ford has not reported a full-year profit in Europe since 2010. It had earned $128 million there in the first three quarters of 2015, after an accounting change announced last week pushed Europe into the black.
Ford previously said it would earn a pretax profit of $8.5 billion to $9.5 billion in 2015, then upped both ends of that estimate by $1.5 billion when it changed its methods for recording pension amortization costs. Tuesday's statement said it now expects results in the upper half of the $10 billion to $11 billion range.
Ford will report its full 2015 results on Jan. 28.
At the Deutsche Bank conference, Ford executives faced some pointed questions about their efforts to shift from a manufacturer into a mobility company, as Fields has described it.
Fields has said the industry’s rapidly changing landscape provides numerous opportunities for new revenue streams, but Morgan Stanley analyst Adam Jonas compared that talk to optimism expressed by leaders at Kodak and Blockbuster before those businesses collapsed. Jonas said the risks Ford faces is a big reason why Ford’s stock has been stagnant.
“We get it,” Fields assured Jonas. “What you’re seeing from us is a very forward-leaning look on this.”
Another analyst asked how investors could be sure Ford’s mobility strategy was more like Facebook -- one of the thriving social media companies -- than Friendster -- one of the many that ultimately failed. Fields said a big difference between now and Ford’s past efforts to chase new businesses is that the executive team is in agreement on the need to focus on mobility services to avoid being left behind.
“This time, we have full management alignment around the need to support our core business and what these emerging opportunities mean if we act on them,” Fields said, “and also what they mean if we don’t act on them.”
In an interview with Automotive News last month, Fields commented on the disparity between Ford’s declining stock price and its increasing profits.
“We have really looked at what are the drivers of creating value in a company,” Fields said.
“The key drivers are around revenue growth, operating margin expansion and dividends. We have worked on those, we are delivering on those, and over time I think we'll get rewarded for those. Do we run the company to juice the stock price? Absolutely not. We run the company to run a profitable, growing organization. Our hope is that will be recognized by the market at some point.”