Yahoo Finance Guidance Casts a Shadow Over Ford Motor Company Stock (F)
Ford Motor Company (ticker: F) shares are down 6 percent this week after the company said its first-quarter earnings will be roughly 50 percent lower than they were in the same quarter a year ago.
On Thursday, a new regulatory filing from Ford projected first-quarter earnings per share in the range of 30 to 35 cents, well short of the 47-cent consensus estimates of Wall Street analysts. Ford reported earnings of 68 cents per share in the first quarter of 2016.
Ford had previously warned investors that 2017 could be a transition year for the company, but investors now seemed concerned that the business slump could be a bit more serious. Ford and rival General Motors Co. ( GM) shares have both declined more than 7 percent in the past five trading sessions, as a new batch of data on used car prices could be an early indication the U.S. auto market has peaked.
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The National Automobile Dealers Used Vehicle Price Index indicates used car prices declined 3.8 percent month-over-month in February, their eighth consecutive monthly decline.
According to Morgan Stanley analyst Adam Jonas, used car prices have a major impact on Ford's financing business, which accounted for 18 percent of the company's total profits in 2016.
"We see Ford as particularly vulnerable given the size of its Finco program," Jonas wrote on March 20.
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Ford's chief financial officer Bob Shanks says that Ford is currently suffering from declining demand for cars and trucks and rising commodity prices for materials such as steel.
"We believe Ford's announcement [Thursday] is the initial confirmation of our investment thesis that pricing is deteriorating in North America and in select international markets, particularly China," Buckingham Research Group analyst Joseph Amaturo wrote in response to the filing.
In addition to Ford and GM, Height Securities analyst Edwin Groshans says subprime auto lenders such as Credit Acceptance Corp. ( CACC), Santander Consumer USA Holdings ( SC) and Ally Financial ( ALLY) could be hit hard by further declines in the auto market.
"The combination of lower used car auction prices and weakening credit quality will manifest in the operations of auto finance companies with subprime lending concentrations," Groshans wrote this week.
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The auto industry delivered its seventh consecutive year of record sales in 2016, leaving investors increasingly concerned that the dip in demand and used car prices in 2017 are the first signs of a potential extended cyclical market downturn.
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