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  • Ford Motor Company (F) May See Less Profits Next Year

    Citigroup Official Logo
    Thursday Sept. 23, 2010 at 06:51 am EST
    Ford Motor Group (F) to earn less in 2011 as compared to 2010
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    According to a research note released on Wednesday by Credit Suisse Securities, Fords Motor (F) earnings are expected to be decreased next year compared to 2010 due to higher costs for materials and pensions.Research Analyst Christopher Ceraso said "To the extent that Ford has been a great earnings momentum story, it will be difficult, in our view, for the shares to push higher in the face of declining earnings," he also added that higher costs "should outweigh a stronger profit contribution from higher production volume in North America," accordingThe Detroit News. Credit Suisse has predicted the pretax income from Ford's North America operations to decrease from $4.8 billion this year to $4.2 billion in 2011 .

    Ceraso also forecasts that Ford Credit, Ford's financing arm, will be less profitable in 2011, after having benefited this year due to higher residual values on returned leased vehicles and record-low credit losses. The finance unit is predicted to earn pretax income of $2 billion next year, compared to $2.7 billion in 2010. Falling yields among high-grade bonds drive higher pension costs, resulting in discount rates for pensions to drop as well. Casero said, that if these discount rates don't show improvement, then Ford's earning could be decreased by 15 to 20 cents per share. Cash contributions are also expected to move higher next year from $1.5 billion in 2010 to as much as $2.7 billion towards global pension plans. Ceraso said that "We estimate that funded status could deteriorate a further $5.5 billion, to about $17.5 billion underfunded at year-end 2010," and also stated that "Based on rising structural and material costs, we are already forecasting an earnings decline in 2011."
    Ford Motors stock closed at $12.38 on Wednesday near resistance level of $12.18. The support levels below are at $11.79 and $11.25. Resistance levels for Citigroup inc. - $12.59 and $12.98.

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