Sterne Agee Pegs Ford FY15 Profit Growth At 59%

Ford Motor Company's F plan to close a Belgium factory will weigh on full-year earnings but the pending launch of its F150 pickup trucks will boost 2015 profit growth to 59 percent, an analyst said Tuesday.

Sterne Agree's Michael Ward cut his 2014 earnings estimate for the Detroit auto maker by 4.3 percent to $1.10 per share, citing the plant closing in Genk, Belgium, as well as industry weakness in Russia.

But Ward maintained his 2015 earnings estimate of $1.75 per share along with a Buy rating and $20 target.

The company last week posted a 34 percent decline in net income while revenue fell 2 percent to $34.9 billion.

The recent quarter included a $160 million charge related to closing the Belgium plant, as well as five weeks of downtime at a Dearborn, Michigan, factory for retooling related to the F-150 truck line.

Ward figures one-time items will diminish in 2015, while the new line of trucks should result in "record profits" for 2015 at the company's North American operation.

The new series of pickup trucks will include extensive use of aluminum for the body and high strength steel for the frame, reducing total weight by 10 percent to 15 percent.

Retooling will continue to hurt the first quarter of 2015, but Ward thinks the trucks will "have an overall positive impact" on 2015 earnings.

Ford announced the Genk closing two years ago, and the factory is slated to churn out its last car at the end of 2014. The company last year agreed to pay $750 million in severance to about 4,000 hourly workers.

Special items in the nine months ended September 30 have amounted to $1.26 billion and European operations contributed a loss of $619 million versus total automotive earnings of $4.72 billion.

Although Ward sees outsized profit growth for Ford next year, he said that if a downturn in demand materialize "over the next year or two," Ford's ability to contain costs during the recovery will enable profitable performance.

Historically, fixed costs at Ford expanded during an industry recovery and peaked along with industry volume, leading to a vicious cycle when the industry moved lower, according to Ward.

Ford traded recently at $14.05 per share, up 1.7 percent.