Ford Motor Company CEO Alan Mulally told shareholders that he expects next year’s earnings to increase over the “solid” profit the company has seen so far in 2010.
“We’re clearly on a path now of profitable growth,” he said at the annual meeting shareholder meeting in Wilmington, Delaware on Thursday.
Mulally said strengthening demand and the introduction of new models, including the redesigned Focus, will lead to continued profitability in 2011. Last month, Ford tempered its stellar earnings report by expressing concern about recent increases in commodity prices and the still-fragile state of the global economic recovery.
Those concerns, along with others, have led Ford’s stock price to fall despite first-quarter income of $2.1 billion. Some are beginning to feel that Ford’s winning streak may be unsustainable. In a May 11 interview, portfolio manager Jeffery Spotts said, “The company is doing fantastic but I don’t know if there’s a lot of upside.” It was that skepticism that led him to sell his Ford holdings for an average return of 275% in April. “When Ford’s outlook was very cloudy and not as positive, there were regular buy signals,” said Spotts. From last November through the end of last month, Ford shares increased eightfold, reaching a five-year high of $14.46 per share on April 26. Since then, the stock has fallen 12% compared with a 3.3% decline in the S&P 500 composite over the same period.
According to an average of analyst estimates compiled by Bloomberg, Ford’s 2010 net income will reach $5.2 billion and is expected to climb to $6.5 billion, excluding one-time items, in 2011.
Mulally assured the company’s shareholders, “The improving global economy is a slow gradual recovery especially in the United States, but with very solid fundamentals.” Executive Chairman Bill Ford also told the gathering that Ford’s leadership has become very vigilant in its efforts to prevent the company from becoming complacent now that it appears to be on the road to long-term stability. “In the past,” he said, “it was a rising tide that floats all boats. This time, we’ve dramatically restructured the company.”
Still, Standard & Poor’s equity analyst, Efraim Levy, says Ford is “not out of the woods yet.” He points to Ford’s domestic competitors, Chrysler Group LLC and General Motors Company, who emerged from bankruptcy last year in a much more competitive position. “Ford has taken advantage of the weakness of their competitors,” said Levy, “and now the challenge will be to continue to outperform them.”
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