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Ford (F) Lowers '16 Pre-Tax View on Higher Recall Costs
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Ford Motor Co. (F - Free Report) lowered its pre-tax guidance for 2016 to roughly $10.2 billion from the previous projection of about $10.8 billion. This resulted from the company’s move to increase the number of vehicles being recalled for a door latch-related issue in North America.
Ford is recalling an additional 1.5 million cars at the request of the National Highway Traffic Safety Administration, taking the total number of vehicles recalled to over 2.38 million. The automaker has identified one reported accident and three injuries that may be related to breaking of the pawl spring tab in the side door latch, which could result in the door opening while driving. The company’s dealers will replace the side door latches of the affected cars at no extra cost to the customer.
The increase in the number of vehicles being recalled will raise the company’s total expense related to this recall to roughly $640 million. Ford will be recording this expense in its third-quarter 2016 adjusted pre-tax results. However, the quarter’s adjusted pre-tax results are still expected to be 10% of the company’s guidance for the full year.
The expected expense will be borne by Ford’s North America business segment in the third quarter. The company previously expected the 2016 pre-tax profit from North America to be in line with the 2015 level of $9.3 billion, with the operating margin at 9.5% or higher compared to 10.2% recorded last year.
Ford’s adjusted earnings per share in the second quarter declined 3.7% from the year-ago quarter to 52 cents. Pre-tax earnings in the quarter also fell 8.8% year over year to $3 billion. However, the company’s revenues increased 5.9% in the quarter to $39.5 billion, with higher revenues recorded in the automotive segment. While earnings missed the Zacks Consensus Estimate, revenues beat the same.
Ford anticipates losses from South America to increase in 2016 from a loss of $832 million incurred in 2015. However, in Europe, the company expects higher profits compared to $259 million earned in 2015. In the Middle East and Africa, it anticipates profits to be in line or higher than $31 million recorded in 2015, while the pre-tax profit from Asia-Pacific is estimated to be higher than the year-ago level of $765 million.
Ford currently holds a Zacks Rank #5 (Strong Sell).
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Ford (F) Lowers '16 Pre-Tax View on Higher Recall Costs
Ford Motor Co. (F - Free Report) lowered its pre-tax guidance for 2016 to roughly $10.2 billion from the previous projection of about $10.8 billion. This resulted from the company’s move to increase the number of vehicles being recalled for a door latch-related issue in North America.
Ford is recalling an additional 1.5 million cars at the request of the National Highway Traffic Safety Administration, taking the total number of vehicles recalled to over 2.38 million. The automaker has identified one reported accident and three injuries that may be related to breaking of the pawl spring tab in the side door latch, which could result in the door opening while driving. The company’s dealers will replace the side door latches of the affected cars at no extra cost to the customer.
The increase in the number of vehicles being recalled will raise the company’s total expense related to this recall to roughly $640 million. Ford will be recording this expense in its third-quarter 2016 adjusted pre-tax results. However, the quarter’s adjusted pre-tax results are still expected to be 10% of the company’s guidance for the full year.
The expected expense will be borne by Ford’s North America business segment in the third quarter. The company previously expected the 2016 pre-tax profit from North America to be in line with the 2015 level of $9.3 billion, with the operating margin at 9.5% or higher compared to 10.2% recorded last year.
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Ford’s adjusted earnings per share in the second quarter declined 3.7% from the year-ago quarter to 52 cents. Pre-tax earnings in the quarter also fell 8.8% year over year to $3 billion. However, the company’s revenues increased 5.9% in the quarter to $39.5 billion, with higher revenues recorded in the automotive segment. While earnings missed the Zacks Consensus Estimate, revenues beat the same.
Ford anticipates losses from South America to increase in 2016 from a loss of $832 million incurred in 2015. However, in Europe, the company expects higher profits compared to $259 million earned in 2015. In the Middle East and Africa, it anticipates profits to be in line or higher than $31 million recorded in 2015, while the pre-tax profit from Asia-Pacific is estimated to be higher than the year-ago level of $765 million.
Ford currently holds a Zacks Rank #5 (Strong Sell).
Some better-ranked companies in the auto space include Tata Motors Limited , Douglas Dynamics, Inc. (PLOW - Free Report) and Standard Motor Products Inc. (SMP - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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