Ford (NYSE:F) CEO Mark Fields promised that 2015 would be a "breakthrough year" for profit. But, he said, much of the "breakthrough" would come in the second half of the year.
The Blue Oval went a long way toward making good on that promise in the third quarter. On Oct. 27, Ford reported net income of $1.9 billion for the quarter, an increase of 129% over year-ago results.
Ford results: The raw numbers
|Metric||Q3 2015||Q3 2014||Growth (YOY)|
What happened with Ford this quarter?
A year ago, Ford's bottom line was hit by the costs of several key investments. The most important (and costly) of those was the ramp-up to production of the new-for-2015 F-150 pickup -- but Ford was also gearing up to launch several other new or refreshed products around the world.
Those investments are now starting to pay off. Ford's North America unit earned $2.7 billion before taxes, up $1.3 billion from a year ago, on revenue of $23.7 billion. Simply put, Ford is selling a lot of its new pickups and SUVs at very strong prices.
That increase was more than enough to offset less favorable results from elsewhere in the world.
South America has been a difficult market for Ford for several quarters now. Ford isn't alone in that respect: Ford's South America unit lost $163 million in the third quarter, but that was a better result (by $7 million) than a year ago, despite worsening conditions. For comparison, General Motors' (NYSE:GM) South American unit lost $217 million over the same period.
Ford Europe has been working on a turnaround plan for a few years now. That plan has narrowed losses, despite a very difficult situation in Russia, where Ford has substantial investments. Ford Europe lost $182 million in the third quarter, a $257 million improvement from a year ago. Sales are up, and Ford's pricing has been good.
Ford Asia Pacific earned $20 million, down $24 million from a year ago. Ford has built a substantial presence in China, but that once-hot market has slowed recently. Ford has been working to reduce its dealers' inventories (which reduced its own shipments) while also gearing up to launch several new products. CFO Bob Shanks said that the unit should see a significant increase in profit in the fourth quarter.
Ford Credit, the company's in-house financing arm, earned $541 million, up $43 million from the third quarter of 2014. Leasing is up, and credit losses remain modest.
The company had $22.2 billion in gross cash as of Sept. 30, and another $11 billion in available credit lines, for total liquidity of $33.2 billion.
What management had to say
Fields made it clear that he was pleased with the results. "The overall headline is that we had an outstanding quarter, and we remain on track to deliver a breakthrough year," he said during the earnings call. "Looking at the numbers, we were at $2.7 billion in pre-tax profit, which was more than double a year ago. We were at $1.9 billion in net income, also more than doubled."
Fields made a point of calling out the new F-150's recent success. "The bottom line is that we are seeing very strong demand [for the F-150]. We're continuing to see a rich mix, we see fast turn rates -- much faster than the segment average. Transaction prices are up $2,800 year over year, higher than our two main competitors."
Fields and Shanks reaffirmed prior guidance. Ford expects its pre-tax profit for the full year to fall between $8.5 billion and $9.5 billion, with revenue, operating margin, and operating-related cash flow all higher than 2014's results.
Ford is well on track to all of those goals. Through the first three quarters, it has earned just shy of $7 billion before taxes -- more than it earned in all of 2014.