Credit Suisse said that Ford Motor Co.’s profits could drop from 2010 to 2011 because of higher material and structural costs. Credit Suisse said that Ford’s earnings momentum will be even more disadvantaged if pension costs rise.
Analysts (including Christopher Ceraso) predict that if discount rates are unchanged and asset returns do not improve, Ford faces an increase of almost $900 million in pension expense in 2011, or an earnings-per-share headwind of about 15 cents to 20 cents.
In a note to clients, the analysts said that it will be “difficult” for Ford’s shares to go higher due to declining earnings. The analysts said that Ford might encounter a "step-down" in the profit contribution from Ford Credit, which continues to benefit in 2010 from gains on higher lease residuals and record-low credit losses.
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.
Thomson Reuters StarMine's SmartEstimate, which gives more weight to forecasts made recently by top-rated analysts, said that Ford could earn up to $1.84 a share in fiscal 2010, and $1.90 per share in 2011.
On the New York Stock Exchange, shares of the company closed at $12.55 on Tuesday. Since achieving a 52-week high last April, the value of Ford’s shares have dropped by 14%. [via autonews - sub. required]