Ford's (F) Pre-tax Profit To Decline In 2017, Rise In 2018

At its Investor Day, Ford Motor Co. (NYSE:F) revealed that its adjusted pre-tax profits are expected to decline in 2017 due to higher investments and costs of emerging opportunities. However, results are expected to improve in 2018. Moreover, adjusted pre-tax profits of the core business are expected to improve in both years.

Total and core operating margins are also expected to follow the same trend as the total and core adjusted pre-tax profits. Further, Automotive operating cash flows are expected to be positive till 2018 and total cash is expected to be equal to or more than the minimum goal of $20 billion.

Ford aims to attain average cost efficiencies of $3 billion per annum from 2016 to 2018. These should offset most of the incremental cost related to business development, except for price-related design costs, regulatory costs and the cost to support the development of emerging opportunities, especially electrification.

Further, Ford revealed several targets, including delivering growth in line with or more than the global GDP, delivering operating margin of at least 8% in the core business and at least 20% in emerging businesses. While building on the strong areas of its core business, Ford plans to transform the underperforming parts of the same, such as luxury, small vehicles and select emerging markets.

Ford also reiterated some previously announced plans such as investing $4.5 billion toward its electrified vehicles goal by 2020 and launching a fully autonomous SAE level 4-capable vehicle by 2021. Ford plans to introduce 13 new electrified vehicles by 2020. The automaker also expects that 40% of its portfolio will have electric versions by then.

Last week, Ford had lowered its pre-tax guidance for 2016 to roughly $10.2 billion from the previous projection of equal to or more than $10.8 billion. This means that the company’s pre-tax results are projected to fall from the 2015 level. This lowered guidance resulted from the company’s move to increase the number of vehicles being recalled for a door latch-related issue in North America. As a result, the expense to be incurred by the company for this recall will increase to roughly $640 million. Despite the reduced guidance, the pre-tax profit for 2016 will still be the second highest since 2000.

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Zacks Rank

Ford currently carries a Zacks Rank #5 (Strong Sell). Some better-ranked automobile stocks include Spartan Motors Inc. (NASDAQ:SPAR) , Superior Industries International, Inc. (NYSE:SUP) and Cooper-Standard Holdings Inc. (NYSE:CPS) . All the three stocks sport a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

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