Sunday, January 23, 2011

Ford Motor Co. (NYSE: F): Q4 Earnings Preview 2010

Ford Motor Co. (NTSE: F) is scheduled to release its fourth-quarter earnings before the opening bell on Friday, January 28, 2011. Analysts, on average, expect the company to report earnings of 48 cents per share on revenue of $30.57 billion. In the year ago period, the company reported earnings of 43 cents cents per share on revenue of $35.40 billion.

Ford Motor Company designs, develops, manufactures, and services cars and trucks worldwide. Ford and its subsidiaries also engage in other businesses, including financing vehicles.

In the preceding third quarter, the Dearborn, Michigan-based company's net income was $1.7 billion, or 43 cents a share, compared to $997 million, or 29 cents a share, in the prior-year quarter. On an adjusted basis, the company earned 48 cents a share in the latest quarter. Revenue dropped slightly to $29 billion from $30.3 billion. Analysts, on average, expected net income of 36 cents a share and revenue of $27.9 billion. 

At its last earnings call in October, Ford said that it expects fourth quarter 2010 production to be up 27,000 units compared with year-ago levels. Fourth quarter production will be up 89,000 units compared to third quarter 2010 production, reflecting the normal seasonal increase following summer shutdowns, as well as new product launches and projected industry growth as economic conditions improve.

The company has benefited from the strength of its new products, consistently better performance at Ford Credit as well as a recovery in the North American automotive market. Unlike GM and Chrysler, Ford did not go through bankruptcy and receive billions of dollars of government loans to enable it to survive and restructure. The company went for a total overhaul of the company's product lines and technology during difficult times.

Light vehicle sales in the U.S. during December rose 12.7% to a seasonally adjusted annual rate of 12.55 million units, reflecting a continuous recovery in the industry. Ford reported a 6.7% increase in December U.S. sales and laid claim to the biggest full-year improvement for any full-line manufacturer in the industry with its 19.4% surge in 2010. Ford said it sold 190,976 cars and trucks last month, up from 179,017 a year earlier to bring its annual total to 1.94 million vehicles. Ford pointed out that it gained market share for the second year in a row, which is the first time it has had back-to-back gains since 1993.

Recently, Ford said that its vehicle sales in China climbed 40% in 2010 from a year earlier, as mainland China consumers were particular keen on its Focus model and its new Fiesta, according to reports. The auto maker reportedly said its China vehicle sales rose to a record 582,467 last year, helped by 56,880 sales in December, a 52% surge from the same month a year earlier.

Ford is also rigorously working to reduce debt. Ford reduced its automotive operations’ debt by $12.8 billion last year, lowering annual interest costs by almost $1 billion. Ford still has $22.8 billion in debt. The company has said that the auto operations would end 2010 with more cash than debt after a profitable year and a $1 billion dividend from the credit unit.

The company is likely get back the investment grade rating in 2012, or by the end of 2011. Moody’s Investors Service rates Ford Ba2, the second level below investment grade, and Standard & Poor’s rates it B+, four steps below. Ford lost its investment-grade ratings in 2005 as rising gasoline prices and falling truck sales led to $30 billion in losses from 2006 through 2008. Moody’s has said it won’t move Ford to investment grade before the results of this year contract talks with the United Auto Workers. The automaker’s labor agreement expires in September. An investment grade rating usually means a company can borrow money at lower interest rates.

In terms of stock performance, Ford shares have gained nearly 70 percent since the beginning of the year.

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