Lower Tax Rate Boosted Ford’s 1Q18 Revenue, Earnings Margin Fell



Ford’s 1Q18 earnings report

The second-largest US automaker by volume, Ford Motor Company (F), announced its 1Q18 earnings results on April 25 after the market closed. In 1Q18, Ford’s adjusted EPS (earnings per share) went up by about 7.5% YoY (year-over-year) to $0.43. Its first-quarter EPS was also better than Wall Street analysts’ estimate of $0.41.

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Revenue inched up

In 1Q18, Ford Motor’s global revenue went up by 7% YoY to $42 billion from $39.1 billion in 1Q17. This total revenue figure included the company’s 1Q18 automotive segment revenue of $39.0 billion, which also rose 7% YoY. Interestingly, Ford’s automotive revenue grew in 1Q despite a ~2% YoY drop in its global wholesales to 1.7 million vehicle units. During the quarter, lower tax rates were one of the key factors that drove Ford’s revenue higher. The company reported a revenue jump in all its key markets except in its Middle East & Africa segment.

EBIT margin dropped

On the negative side, Ford’s automotive segment EBIT (earnings before interest and taxes) fell by 20% YoY to $1.7 billion in the first quarter this year. This drop also affected the company’s EBIT margin for the quarter, which came in at 4.4%, much lower than the 6.0% in 1Q17. While Ford’s EBIT in North America and Europe rose in 1Q18, it fell sharply in the Asia-Pacific region. Also, minor declines in 1Q18 EBIT in South America and the Middle East & Africa markets acted as headwinds to Ford’s overall profitability.

To learn more about Ford’s business overview, read our special series, A Must-Read Guide to Ford Motor Company, an Auto Industry Pioneer.

Other key highlights

In its 1Q18 earnings presentation, Ford highlighted that it’s advancing its EBIT target of 8% to fiscal 2020, which was originally planned for fiscal 2022. In addition, the company will start launching its all-electric vehicles (or EVs) in 2020 and plans to roll out 16 EVs by 2022. Ford’s better-than-expected 1Q18 earnings drove its stock up 2.9% in the after-hours trading session on April 25 (as of 5 PM EST).

Other major auto companies (FXD) such as General Motors (GM), Fiat Chrysler (FCAU), and Tesla (TSLA) will release their 1Q earnings in the coming few days. Please visit Market Realist’s Autos page to stay updated on analysts’ estimates for auto companies’ 1Q18 earnings.

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