Ford Could See Earnings Decline through 2011, Credit Suisse Says
Ford Motor Co. could see its profits decline from 2010 to 2011 due to higher material and structural costs, said Credit Suisse, which expects the automaker's earnings momentum to come under further pressure if pension costs rise, Reuters reported.
Ford faces a nearly $900 million increase in pension expense in 2011, or an earnings-per-share headwind of about 15 cents to 20 cents if discount rates remain unchanged and asset returns do not improve, analysts, including 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," the analysts wrote in a note to clients.
Ford could see a "step-down" in the profit contribution from Ford Credit, which is benefiting in 2010 from gains on higher lease residuals and record-low credit losses, the analysts said.
Credit Suisse analysts, who rate the stock "underperform" with a price target of $11, estimate Ford will post earnings of $1.71 per share in 2010, and $1.40 a share in 2011.
Ford -- the only large U.S. automaker to avoid bankruptcy in 2009 -- could earn as much as $1.84 a share in fiscal 2010, and $1.90 per share in 2011, according to Thomson Reuters StarMine's SmartEstimate, which gives more weight to recent forecasts by top-rated analysts.
Shares of the company closed at $12.55 on Tuesday on the New York Stock Exchange. The automaker's shares have fallen 14 percent in value since touching a 52-week high in April.
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