BUSINESS

Ford Profits Higher Than Forecast, May Lead To Return Of Dividends

10/26/2011 09:28 am ET | Updated Dec 26, 2011

(Bernie Woodall and Ben Klayman) - Ford Motor Co posted lower third-quarter earnings after misjudging the threat of higher commodity costs and writing down the value of hedge positions.

But it was the 10th consecutive quarterly profit for the No. 2 U.S. automaker and topped Wall Street forecasts, extending a recovery expected to clear the way for a resumption of dividends.

Chief Financial Officer Lewis Booth told reporters Ford would not be addressing the timing of reinstituting a dividend yet. It last paid a dividend in September 2006.

The company on Wednesday posted third-quarter net income of $1.65 billion, or 41 cents per share, down from $1.69 billion, or 43 cents per share, a year earlier.

Revenue rose to $33.1 billion from $29 billion.

Excluding one-time items. Ford earned 46 cents per share. On average, analysts forecast 44 cents, according to Thomson Reuters I/B/E/S.

Ford lowered its automotive debt by $1.3 billion in the quarter, to $12.7 billion. It will save about $1 billion in interest payments in 2011 compared to 2010 because of its debt-reduction efforts.

In the third quarter, Ford benefited from stronger-than-forecast output in North America after U.S. auto sales steadied over the summer without evidence of the renewed slump some analysts had feared. Ford also raised its global and North American production forecast for the fourth quarter.

Last week, Booth said Ford could restart a dividend before it regains an investment-grade credit rating, but he did not discuss the timing of such a move.

On Wednesday he said, "We want to return to paying a dividend as soon as we think our balance sheet will stand it, and when we're ready to talk about it we will."

Morgan Stanley analyst Adam Jonas said in a note for clients before the earnings were released, "We expect the focus going into the Ford call to be on the timing and size of its dividend."

On the heels of last week's labor agreement between Ford and the United Auto Workers union, Fitch Ratings and Standard and Poor's both raised the company's credit rating to within one notch of investment grade.

Moody's Investors Service has not changed its rating on Ford, which is currently two notches below investment grade. But earlier this month Moody's said it was considering an upgrade.

Ford was last at investment grade in 2005.

Costs related to the contract ratification by Ford's 41,000 unionized auto workers were not reflected in the third-quarter results.

Ford shares were down 7 cents to $12.36 in premarket trade.

(Reporting by Bernie Woodall and Ben Klayman, writing by Kevin Krolicki; editing by John Wallace)

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