Monday, April 25, 2011

Ford Motor Co. (NYSE: F): Q1 Earnings Preview 2011

Ford Motor Co. (NTSE: F) is scheduled to release its first-quarter earnings before the opening bell on Tuesday, January 26, 2011. Analysts, on average, expect the company to report earnings of 50 cents per share on revenue of $30.64 billion. In the year ago period, the company reported earnings of 46 cents per share on revenue of $28.10 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 fourth quarter, the Dearborn, Michigan-based company's net income was $190 million, or 5 cents a share, from $886 million, or 25 cents a share, in the prior-year quarter. On an adjusted basis, the company earned 30 cents a share in the latest quarter. Revenue declined to $32.5 billion from $34.8 billion. Analysts, on average, expected the company to report earnings of 48 cents per share on revenue of $30.57 billion.

For the first quarter, Ford expects total production volumes to reach 1.447 million units, comprising 650 thousand units in North America, 116 thousand units in South America, 442 thousand units in Europe, ans 239 thousand units in Asia Pacific Africa. At its last earnings call in January, Ford said that it plans to build on its performance in 2010 with continued improvement in 2011 total company pre-tax operating profit and Automotive operating-related cash flow. Ford expects each of its Automotive operations to be profitable in 2011. In addition, the Automotive operating margin is expected to be equal to or improved from 2010. The company expects its full year U.S. total market share and its share of the U.S. retail market as well as European market share to be equal to or improved from 2010. For full-year 2011, Ford Credit expects to be solidly profitable but at a lower level than in 2010. The company expects to pay distributions to its parent of about $2 billion in 2011.

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.

In February, Ford Motor Co. said that it will boost its production for deliveries to its U.S. deals by 13% in the first quarter of 2011.

The company surpassed General Motors Co. (NYSE: GM) in sales in March for the second time in 13 years. Early in April, Ford said that total U.S. sales in March jumped 19.2% to 212,777 vehicles from 178,546 in the year-ago period. Sales during the first quarter rose 15.9% to 496,720 units.

Recently, Ford said that its vehicle sales in China increased 19% in the first quarter from a year earlier to 140,566 units, and its sales in March rose 20% from a year earlier to 53,440 units amid sustained demand for passenger and commercial vehicles. The company plans to introduce 15 new vehicles in China by 2015, stepping up its efforts to expand in the world's biggest auto market. The 15 new vehicles are also part of Ford's plan to introduce 50 new products to Asia Pacific and Africa in the next four years.

Ford is also rigorously working to reduce debt. Ford reduced its outstanding automotive debt by more than $1.9 billion during the fourth quarter, and by a total of $14.5 billion in 2010. The company reduced its debt load by another $3 billion by redeeming all of its outstanding 6.5% cumulative convertible trust preferred securities on March 15. The conversion, which will result in a first-quarter charge of up to $60 million, will cut annualized debt costs by about $190 million

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 BB-, three 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. An investment grade rating would allow Ford to sell bonds to a large number of institutional investors forbidden to invest in junk bonds, which would likely lower Ford's cost of borrowing.

Among other developments, the car maker recently warned that its financial results could be hurt by supply chain disruptions caused by last month's quake in Japan. "Should the supply of a key material or component from Japan be disrupted and an alternate supply not be available, we could have to reduce or temporarily cease production of vehicles, which could adversely affect our and Ford Motor Credit Company's financial condition and results of operations," the company said

The company's stock currently trades at a forward P/E (fye Dec 31, 2012) of 7.83 and PEG ratio (5 yr expected) of 0.48. In terms of stock performance, Ford shares have gained nearly 6 percent over the past year.

Full Disclosure: None.
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