Market Overview

Ford Earnings Preview: Eyes On China & Europe

Ford Earnings Preview: Eyes On China & Europe

Ford (NYSE: F), which this week announced who will replace departing CEO Alan Mulally, is scheduled to report its first-quarter 2014 results Friday, April 25, before the markets open.

Investors will be looking for continued strength in North America, Ford's biggest market, but also in China, where it overtook Honda and Toyota last year. They will want to see some sign of improvement in European operations. As with many other earnings reports this season, weather in the quarter is likely to be a factor.

See also: Ford Names Mark Fields As Next CEO


Analysts on average predict that Ford will report that its revenue for the quarter increased marginally year-over-year to $34.06 billion. Earnings of $0.31 per share are also in the consensus forecast. That would be down from a reported profit of $0.41 per share in the comparable period of last year.

Note that the consensus earnings per share (EPS) estimate has ticked down by a penny in the past 60 days. However Ford topped consensus EPS estimates in the previous four quarters by double-digit percentages. The beat in the previous quarter was by more than 10 percent.

In the fourth-quarter report, Ford trumpeted its 18th consecutive profitable quarter and said 2013 was one of its "best years ever." But it warned that 2014 likely would not be as profitable. The share price retreated more than 11 percent in the days following the fourth-quarter report.

Looking ahead to the current quarter, the forecast currently calls for year-over-year and sequential growth of revenue, but another year-over-year decline in earnings. That consensus EPS estimate also has slipped by a penny in the past 60 days. Full-year EPS are projected to be more than 17 percent lower.

The Company

Ford Motor Company manufactures and distributes vehicles, parts and accessories and services vehicles worldwide, primarily under the Ford and Lincoln brand names. The company operates through two sectors: Automotive and Financial Services.

The company was founded in 1903, and its headquarters are in Dearborn, Michigan. Ford is a component of the S&P 500, and it now has a market capitalization of around $64 billion. The soon to depart Alan Mulally has been the chief executive officer and president of the company since September 1, 2006. Chief Operating Officer Mark Fields will replace Mulally as CEO.

Competitors include General Motors and Toyota. GM is expected to post an earnings decline for the first quarter and earnings growth for the current quarter. Toyota reported strong results in its most recent report and raised its full fiscal year guidance.

During the three months that ended in March, Ford turned to BlackBerry for its next generation Sync, saw a surge in sales in Europe and China in February and announced it would cut production in Russia. And William Clay Ford Sr. passed away.

See also: William Clay Ford Sr. Dies


Ford has a long-term earnings per share growth forecast of more than 11 percent and a price-to-earnings (P/E) ratio less than the industry average. Its operating margin is also greater than the industry average, and it has a return on equity of almost 34 percent. The dividend yield is near 3.1 percent.

The number of Ford shares sold short, as of the most recent settlement date, represented less than two percent of the total float. That was the second lowest level of short interest so far this year. It would take more than two days to close out all of the short positions.

The consensus recommendation of analysts surveyed by Thomson/First Call who follow the stock has been to buy shares for at least the past three months. The analysts' mean price target, or where they expect the stock to go, is almost nine percent higher than the current share price. That target is less than the 52-week high, though.

At the time of this writing, shares are more than four percent higher than at the beginning of the year but still below the 200-day moving average. Over the past six months, the stock has underperformed General Motors and the broader markets, but it has outperformed Toyota.

At the time of this writing, the author had no position in the mentioned equities.

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Posted-In: Alan Mulally Blackberry Ford General MotorsEarnings News Previews Trading Ideas Best of Benzinga


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