Ford Q4 Earnings: What Will Investors' Key Focus Be?

Ford Motor Company F reports its fourth-quarter earnings on Thursday, and Deutsche Bank believes the key focus of investors would be on the developments in the automaker’s core U.S. market amid potential policies of the new Trump administration.

Trump's America And Ford

The brokerage is optimistic on the U.S. macro outlook, driven by policies being proposed by the new U.S. administration and Congress (i.e. lower taxes, infrastructure spending, repatriation, de-regulation).

“We believe that these factors could potentially mitigate industry headwinds including rising rates, declining trade in values, rising regulatory content costs, tightening credit, and potentially longer ownership cycles (longer loan amortizations),” analyst Rod Lache wrote in a note.

Lache has revised his estimates following Ford’s updated tax rate outlook at DB’s conference in Detroit on January 10. As such, the analyst cut his fourth quarter EPS estimate to $0.28 from $0.34 versus consensus of $0.32.

Ford still expects to report adjusted pre-tax earnings of $10.2 billion for 2016 with automotive operating cash flow of greater than $4.9 billion.

Ford continues to expect that their 2017 pre-tax earnings and automotive operating cash flow lower than 2016 due to investments in emerging opportunities while the core business is flat.

Analyst's Bottom Line

Commenting on the impact on auto OEM’s from tax reform/trade policy, the analyst noted that Ford is the major beneficiary (their costs may not increase). On the other hand, among the Detroit Three, Lache said Fiat Chrysler Automobiles NV FCAU would be the most hit, as he estimates a $2 billion plus tax cost headwind.

Lache has a Hold rating on Ford shares, with a price target of $13.

At last check, shares of Ford were up 0.63 percent to $12.69.