Ford Credit’s 2Q15 profits
Previously in this series, we’ve seen the 2Q15 performance of Ford’s (F) automotive operations. Now, we’ll look at how Ford Credit contributed to Ford’s 2Q15 profits.
Ford Credit provides financing to Ford’s dealers and customers. It’s a strategic asset for Ford, as it helps the company establish enduring relationships with its customers.
Ford Credit is the second-largest contributor to Ford’s profits, after its North America Automotive operations.
Ford Credit’s profits rise
Ford Credit posted a pre-tax profit of $506 million in 2Q15, up 16% year-over-year. The segment benefited from higher volumes. Leasing activity in the United States (VTI) remains strong. Credit losses and delinquencies are also low currently. These factors bode well for all companies operating in the auto financing business.
Ally Financial (ALLY) and Wells Fargo (WFC) are the biggest auto lenders. They’re followed by J.P. Morgan (JPM), Capital One Financial (COF), and Bank of America (BAC), respectively. Together, these five banks accounted for ~57% of the auto loans held by commercial banks at the end of 2014.
Ford’s 2Q15 cash flows
Ford’s automotive operations posted strong operating cash flows of $1.9 billion in 2Q15. Ford ended 2Q15 with gross cash of $20.7 billion. Ford has net cash of $6.1 billion after adjusting for the total debt of $13.4 billion. Strong cash flows help Ford pay generous dividends to its shareholders. Ford currently offers a healthy dividend yield of 4.2%.
In the coming months, Ford investors should keep a close eye on sales of the F-150. Ford has ramped up the production for this aluminum-bodied pick-up truck. Another factor to watch will be how vehicle sales in China shape up in the coming months.
You can track the recent happenings in this industry by visiting Market Realist’s Automobile page.