Ford Motor Company (NYSE:F) reported third-quarter net income of $425 million, down from $991 million in the third quarter of 2018, as one-time charges related to restructuring actions in Europe and India weighed.

Excluding those one-time charges, Ford earned $0.34 per share, up from $0.29 per share a year ago and above Wall Street's consensus estimate. Wall Street analysts polled by Thomson Reuters had expected Ford to report adjusted earnings of $0.26 per share. Ford's automotive-segment revenue was $33.93 billion, down from $34.66 billion a year ago and slightly short of Wall Street's estimate of $34.09 billion.

Ford also cut its full-year earnings guidance on growing concerns about weakness in the North American and Chinese markets. Shares fell in after-hours trading after the news was released.

A worker attaches parts to a partially assembled 2020 Ford Explorer on a production line at Ford's Chicago Assembly Plant.

The production ramp-up of Ford's all-new 2020 Explorer was slowed by early quality issues; tight supplies hurt third-quarter results. Image source: Ford Motor Company.

The raw numbers

Here are the key numbers from Ford's third-quarter 2019 results.

Metric Q3 2019 Change vs. Q3 2018
Revenue $37.0 billion (2%)
Wholesale shipments (rounded to the nearest thousand) 1,244,000 (8%)
Adjusted EBIT $1.79 billion 7.5%
Adjusted EBIT margin 4.8% 0.4 ppts higher
Net income $425 million (57%)
Adjusted earnings per share $0.34 17.2%
Adjusted free cash flow $207 million 80%

Data source: Ford Motor Company. "EBIT" is earnings before interest and tax. "Adjusted" figures exclude the effects of one-time items. Ford took $1.536 billion in one-time charges in the third quarter of 2019 and $231 million in one-time charges in the third quarter of 2018. "Ppts" = percentage points.

How Ford's business units performed

All financial results in this section are reported on an EBIT basis, except as noted.

North America:  Ford earned $2.01 billion in North America, up $52 million from the third quarter of 2018. Revenue rose 5% to $23.4 billion, but wholesale shipments fell slightly from a year ago, to about 639,000. U.S. sales fell 4.9% in the quarter on tight supplies of the all-new 2020 Explorer amid early production snags; in an interview, CFO Tim Stone said that Explorer is now "nearly" at full production.

Ford North America's EBIT margin, a number widely watched by Ford investors, was 8.6% in the third quarter. That's a decline of 0.2 percentage points from a year ago, but still a solid result. 

Europe: Ford Europe lost $179 million in the third quarter, versus a loss of $245 million in the third quarter of last year. Sales in key European markets rose 3.1% in the quarter, but revenue fell 14% to $6.4 billion. The reason: Ford's wholesale shipments declined 15% to about 303,000 as it continued to revamp its Europe product portfolio.

South America: Ford lost $165 million in South America, versus $152 million a year ago. Revenue fell 19% to $1.0 billion on a 16% decline in wholesale shipments after Ford shut down its heavy-truck business in the region.

China: Ford lost $281 million in China in the third quarter, an improvement of $97 million from a year ago, as pricing and cost improvements more than offset a 30% year-over-year decline in sales.

Middle East and Africa: Ford lost $27 million here, versus a profit of $47 million a year ago. Revenue fell 2% on a 4% drop in wholesale shipments.

Asia Pacific: Ford's "rest of the world" unit lost $31 million in the third quarter, versus a profit of $170 million in the third quarter of 2018. Revenue fell 12% to $1.7 billion on a 19% drop in wholesale shipments.

Ford Credit: Ford's captive-finance subsidiary earned $736 million in pre-tax profit, up 9% from $678 million in the third quarter of last year. Credit and loss metrics remain strong, roughly unchanged from last year; auction values are down slightly from a year ago, but trending a bit above Ford's expectations.

Debt and liquidity

Ford ended the third quarter with $22.3 billion in cash available to its automotive business, down slightly from $23.1 billion at the end of 2018. It had an additional $13.1 billion in available credit lines, for total automotive liquidity of $35.4 billion, up from $34.2 billion at the end of 2018.

On the other side of the ledger, Ford had $14.8 billion in well-structured long-term debt as of the end of the quarter, up from $14.1 billion at the end of 2018.

Looking ahead: Ford's guidance

Stone said that Ford now expects "headwinds" -- including recall costs, higher incentives in the U.S., and lower sales in China -- to have a greater effect in the fourth quarter than it had anticipated when it last updated its full-year guidance in July.

As a result, Ford cut its earnings guidance once again. It now expects:

  • Adjusted earnings per share between $1.20 and $1.32. (Prior guidance: Between $1.20 and $1.35.) (2018 result: $1.30).
  • Adjusted EBIT between $6.5 billion and $7.0 billion. (Prior guidance: Between $7.0 billion and $7.5 billion.) (2018: $7.0 billion).

But despite the headwinds, Stone said that Ford still expects its full-year adjusted free cash flow to exceed its 2018 result ($2.8 billion), unchanged from earlier guidance.