Ford Motor has made a surprisingly weak earnings forecast for 2017 amid an industry-wide sales decline but expects an improvement in 2018 as its investments in “emerging opportunities” start to pay off.
In a regulatory filing Thursday, the automaker predicted adjusted pre-tax profit of about $9 billion this year, down from $10.4 billion in 2016.
“Benefiting from two consecutive years of record U.S. car and truck demand, company executives had signaled that 2017 will be a year of transition, marked by a heavy investment in new technologies that will help the company expand beyond its core auto-making business and enter new transportation-related services,” MarketWatch said.
Those technologies include autonomous vehicles, with Ford aiming to release a fully driverless car for ride-sharing, without a steering wheel or pedals, in 2021.
For the first quarter, Ford issued guidance of per-share earnings of 30 to 35 cents, compared with the 68 cents it earned in the year-ago period. It cited higher costs including commodities, warranty, and business investments, lower volume, and unfavorable exchange rates.
The company’s shares fell as much as 1.7% in trading Thursday but rallied to close at 11.67, down 0.85%.
“We believe Ford’s announcement today is the initial confirmation of our investment thesis that pricing is deteriorating in North America and in select international markets, particularly China,” Buckingham Research Group analyst Joseph Amaturo wrote in a client note.
This will “cause earnings and cash flow for Ford and GM to deteriorate and fall short of investor expectations and more importantly company guidance,” he wrote.
Ford expects auto sales in China, the world’s largest car market, to dip to 27.2 million this year from 27.5 million in 2016. It is forecasting U.S. auto industry sales of 17.7 million units in 2017, down from a record of 17.9 million in 2016.
“We think we can do more with trucks, we think we can do more with utility vehicles, we can do more with performance and we’ve got plans in place to do that,” CFO Bob Shanks said Thursday at an investor presentation.