PVTL Pivotal Software Inc

By Mike Colias 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 25, 2019).

Ford Motor Co. posted flat second-quarter operating income and a disappointing earnings outlook, but stood by a forecast for improved profitability this year as it begins to reverse steep losses overseas.

The company's shares fell in after-hours trading as its quarterly results and full-year earnings forecast fell short of analysts' expectations.

Ford on Wednesday reported $1.7 billion in operating profit for the April-to-June period, helped by strong sales and pricing on pickup trucks and sport-utility vehicles in its home U.S. market. In another sign of some early progress on Chief Executive Jim Hackett's turnaround strategy, the company also sharply cut losses in China and swung to a small profit in Europe.

Ford's earnings per share, adjusted for one-time items, was 28 cents, lower than the 31-cent average forecast from Wall Street analysts. That result included a 4-cent drag from a loss in value on Ford's investment in a software company, Pivotal Software.

Net income also sank to $148 million, from $1.1 billion a year earlier. The drop is largely explained by more than $1 billion in charges stemming from plant closures and layoffs in Europe and South America, where Ford recently undertook major restructurings.

Ford shares slid nearly 7% in after-hours trading Wednesday. The stock has rallied 35% this year amid improved financial results and progress on a global restructuring plan aimed at restoring profitability to money-losing business overseas.

Ford said earnings per share for 2019 would be $1.20 to $1.35, lower than the $1.40 analysts' average estimate. It expects operating income this year to be between $7 billion and $7.5 billion, up from $7 billion last year. Ford previously said it expected an improvement, but hadn't pegged a range.

Second-quarter revenue was flat at $38.9 billion. After a rough two-year stretch, Mr. Hackett crafted a turnaround plan which is showing some success. The company said operating income from its automotive business has grown for two straight quarters, the first time that has happened in more than three years.

Ford is adding more trucks and sport-utility vehicles to its lineup while trimming smaller, less-profitable car lines in the U.S. and other markets. It also is shrinking its presence in Europe and South America to focus on higher-margin categories, like commercial vans and pickup trucks.

Ford trimmed losses in China to $155 million, from $483 million a year earlier. The company has seen its market share dwindle in the world's largest car market over the last two years, largely the result of a tired product lineup, current and former executives have said.

In the second quarter, Ford's China business got a lift from its Lincoln luxury brand, which grew 7% in a down market and also benefited from lighter import tariffs compared to a year earlier. The company also said it is squeezing out more cost savings from its China business as it tries to return to a profit.

Ford's Europe business swung to a $53 million operating profit, from a $73 million loss a year earlier, as stronger sales of vehicles to business buyers helped offset higher regulatory costs.

"We expect continued strong execution" in China and Europe, Ford finance chief Tim Stone told reporters Wednesday.

Profits from North America and its strong finance arm, Ford Credit, continue to carry the auto maker despite slight setbacks.

Operating profit from North America slipped 3% to $1.7 billion. Overall U.S. vehicle sales were down in the quarter, but Ford benefited from continued strong pricing on its F-Series pickup trucks, the company's biggest moneymaker. The company boosted average selling prices on the trucks by $1,200, to around $47,500.

Ford also benefited from a 50% jump in sales of freshly redesigned Ford Expedition large sport-utility vehicle, which routinely sells for more than $60,000 and carries big profit margins.

Write to Mike Colias at Mike.Colias@wsj.com

(END) Dow Jones Newswires

July 25, 2019 02:47 ET (06:47 GMT)

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