Ford Earnings Preview: Set for an Upbeat Quarter

Ford earnings preview first-quarter 2010
Ford earnings preview first-quarter 2010

As the economy continues to improve and consumers once again venture out to the nation's new-car showrooms, Ford Motor (F) appears to have benefited more than most automakers from rising industry sales. Ford's first-quarter earnings, due to be released Tuesday, are expected to show that the Dearborn, Mich.-based company continues to prosper from a strong product lineup and a renewed focus on its core brands.

Expectations are that Ford earned more than a $1 billion during the first three months of the year, according to a consensus estimate of seven analysts by Bloomberg. On a per-share basis, analyst forecasts call for Ford to earn 31 cents on revenues of $28 billion. In last year's first quarter, the carmaker reported a loss of 75 cents a share on sales of $24.8 billion.

"There's a lot of momentum at Ford right now in terms of customers' perception of their products," Standard & Poor's equity analyst Efraim Levy told Bloomberg News. Said Levy, who advises holding the shares: "We're hitting the point where it's time to give them the benefit of the doubt, rather than view them with skepticism."

Flirting With No. 2

Ford boosted sales in each of the first three months of the year, reporting 43% year-over-year increases in both February and March. In the early going, Ford even managed to overtake Toyota Motor (TM) as the No. 2 vehicle supplier in the U.S., largely because of the Japanese automaker's series of high-profile safety recalls. To reverse falling sales, Toyota responded by offering generous incentives, such as zero-interest loans and cheap leases. That allowed it to once again secure second place in March.

The first quarter also marked the sale of Ford's last holding in its former Premier Automotive Group unit. In March, it sold Swedish luxury-car maker Volvo to China's Zhejiang Geely Holding Co. for $1.8 billion. The sale was an integral part of Ford's "Way Forward" restructuring plan, first developed in 2006. It calls for the company to, among other things, focus on the Ford brand. In addition to Volvo, Ford has jettisoned Jaguar, Land Rover and Aston Martin.

Riding higher on the ongoing Wall Street rally as well as on improved sales, Ford shares also moved up smartly in the quarter, gaining about 45% since Jan. 1. On Monday, the shares closed up nearly 2% at $14.46 each.

Ongoing Momentum

The longer-term outlook for Ford remains upbeat, with analysts on-average recommending the stock as a buy. With strong momentum at its back, Ford's sales aren't likely to reverse anytime soon. As consumers continue to regain confidence in the economy, big-ticket items such as cars should keep selling well.

The big unknown for Ford -- and other automakers -- is how long Toyota will continue its aggressive incentives aimed at wooing back leery car buyers. Still, Ford has managed to increase in sales without relying too heavily on incentives, a move that could further bolster profitability and its image in the months ahead.

Originally published