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Ford Motor Company (NYSE: F) reported robust 1Q results, beating estimates in almost every segment. Goldman Sachs’ Patrick Archambault maintained a Buy rating for the company, while raising the price target from $16 to $17.
North America
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The beat in North America was significantly different, analyst Patrick Archambault noted, adding that the majority of the upside was driven by a $933mn tailwind in contribution costs. Ford is likely to handsomely beat its North America margin benchmark of 9.5 percent from 2015.
Archambault added, however, that although the margin estimate is at 10.3 percent, this implies margin contraction of about 200bp y/y in the back half of 2016, “which could fuel ongoing concerns about peak earnings.”
“We believe that North America profitability should have some staying power with the full volume impact of some of the larger launches (e.g. Super Duty and Escape) likely to roll into next year,” the Goldman Sachs report noted.
Other Regions
Most of the growth opportunity lies internationally, and the biggest tailwind is expected from Europe. Archambault estimated Europe operations to make a $955mn profit contribution over two years, “driven by an ongoing recovery in the market as well as a solid product cycle.”
The analyst believes that volumes are bottoming in Brazil and Ford should be able to trim losses in South America through 2017, with continued cost control.
Although a pullback in Chinese volumes is expected in 2017 and pricing headwinds could continue, Asia is expected to contribute $74mn in incremental growth.
Estimate Changes
The EPS estimates for 2016, 2017 and 2018 have been raised from $2.02 to $2.14, from $2.23 to $2.28 and from $2.04 to $2.08, respectively.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.