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Ford could see earnings decline through 2011, Credit Suisse says

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Ford could see earnings decline through 2011, Credit Suisse says

September 22, 2010 - 7:46 am ET

(Reuters) -- Ford Motor Co. could see its profits decline from 2010 to 2011 due to higher material and structural costs, said Credit Suisse, which expects tthe automaker's earnings momentum to come under further pressure if pension costs rise.

Ford faces a nearly $900 million increase in pension expense in 2011, or an earnings-per-share headwind of about 15 cents to 20 cents if discount rates remain unchanged and asset returns do not improve, analysts, including Christopher Ceraso, said.

"To the extent that Ford has been a great earnings momentum story, it will be difficult, in our view, for the shares to push higher in the face of declining earnings," the analysts wrote in a note to clients.

Ford could see a "step-down" in the profit contribution from Ford Credit, which is benefiting in 2010 from gains on higher lease residuals and record-low credit losses, the analysts said.

Credit Suisse analysts, who rate the stock "underperform" with a price target of $11, estimate Ford will post earnings of $1.71 per share in 2010, and $1.40 a share in 2011.

Ford -- the only large U.S. automaker to avoid bankruptcy in 2009 -- could earn as much as $1.84 a share in fiscal 2010, and $1.90 per share in 2011, according to Thomson Reuters StarMine's SmartEstimate, which gives more weight to recent forecasts by top-rated analysts.

Shares of the company closed at $12.55 on Tuesday on the New York Stock Exchange. The automaker's shares have fallen 14 percent in value since touching a 52-week high in April.

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20100922/OEM/309229963/1421#ixzz10IkokxDM

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Rising pension, material costs to weaken Ford earnings, forecast says

Alisa Priddle / The Detroit News

Ford Motor Co. will see a decline in earnings from 2010 to 2011 because of rising pension costs on top of increased material and structural costs, according to a Credit Suisse Securities report released today.

"To the extent that Ford has been a great earnings momentum story, it will be difficult, in our view, for the shares to push higher in the face of declining earnings," said research analyst Christopher Ceraso in the report.

Ceraso writes that the higher costs "should outweigh a stronger profit contribution from higher production volume in North America."

Pretax income forecasts call for the biggest declines from 2010 to 2011 to be in North America, falling to about $4.2 billion from $4.8 billion.

"We have also projected a step-down in the profit contribution from Ford Credit, which is benefiting in 2010 from gains on higher lease residuals and record-low credit losses," Ceraso said. Credit Suisse projects pretax income for Ford Financial Services will drop to $2 billion in 2011 from $2.7 billion in 2010.

Credit Suisse analysts say 2010 is shaping up to be a bad year for pension plans because high-grade bond yields have tumbled, which will lead discount rates for pension pensions to be marked down as well.

Ceraso sees the issue as most important for Ford, where he projects an increase in 2011 pension expenses of $900 million to $1.5 billion compared with $600 million in 2009.

As a result, Credit Suisse is taking a cautious stance on Ford stock, estimating Ford's 2010 earnings at $1.71 per share with a projected decline to $1.40 in 2011.

"If discount rates and asset returns do not improve between now and year-end, our 2011 earnings estimate could be pressured to the tune of $0.15-$0.20/share," he said.

From The Detroit News: http://detnews.com/article/20100922/AUTO01/9220403/1148/auto01/Rising-pension--material-costs-to-weaken-Ford-earnings--forecast-says#ixzz10IniKp8q

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FORD'S EARNINGS COULD DECLINE THROUGH 2011

By Drew Johnson

Ford’s financial situation has been relatively strong throughout 2010, but Credit Suisse expects the Michigan automaker’s profits to decline through 2011, eroding the company’s financial outlook.

Ford’s stock hit a 52-week high in April, but has been on a slow decline ever since. Credit Suisse expects that trend to continue through 2011, thanks to several market factors.

Like the rest of the auto industry, Ford will be facing higher material costs in 2011, but the Blue Oval will also be battling structural costs and a nearly $900 million increase in pension funding. Credit Suisse has tagged Ford’s stock with an “underperform” designation.

"To the extent that Ford has been a great earnings momentum story, it will be difficult, in our view, for the shares to push higher in the face of declining earnings," Credit Suisse said in a statement to clients.

Ford’s stock is currently trading at around $12.31 – roughly 15 percent down from its April high.

link:

http://www.leftlanenews.com/fords-earnings-could-decline-through-2011.html

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