Ford Earnings Preview: Profits Expected to Hit the Gas Amid Recovery

Ford Earnings Preview: Second Quarter Profits
Ford Earnings Preview: Second Quarter Profits

Ford Motor (F) is set to deliver strong earnings when it reports second-quarter results Friday. After disastrously low sales in 2009, the auto industry as a whole has been in recovery mode this year -- and Ford has been one of the biggest beneficiaries of the revival.

Analysts expect the automaker to earn 40 cents a share in the second quarter, based on a consensus estimate by, with quarterly net profits rolling in at as much as $1.62 billion. That would be quite a change from last year's second quarter, when Ford reported an operating loss of $638 million, or 21 cents a share, after accounting for a gain from debt reductions.

Strong demand for Ford models such as the Fusion and the recently refashioned Taurus has helped the Dearborn, Mich., automaker outsell rival Toyota Motor (TM) in the the U.S. market in recent months. That bump in sales, combined with strong cash flow, has allowed Ford to unload some of its substantial debt.

Customers Are Buying More, Paying More

Ford CEO Alan Mulally, who took over in 2006, has sought to revive the Ford brand -- and the company -- by aggressively redesigning existing models and rolling out new ones. He has also overseen the sell-off of the company's luxury European nameplates, such as Volvo and Land Rover, and focused more on the Ford brand. Plans also call for the Mercury nameplate to be shuttered later this year.

It's a strategy that has worked. Not only are customers snapping up more Ford cars, they are also buying them with more options and at a lesser discount. The current model year Taurus is selling for about $6,300 more than the comparable 2009 model, Bloomberg News reported, citing data from industry researcher

Across all Ford models, purchasers paid an average $30,309 last month, as they loaded up on options such as heated seats and better electronics. That's an increase of 14% from five years ago. The Ford brand has earned renewed caché with the American driving public, IHS Automotive analyst John Wolkonowicz told Bloomberg. "Nobody will criticize you at the cocktail party now for owning a Ford," he said.

Wall Street Hasn't Caught Up With Main Street

The automaker's renewed focus on products hasn't only resulted in increased traffic in showrooms; it has also earned a bevy of industry awards and kudos. Among the most recent of those plaudits came from J.D. Power, whose latest survey of new-car owners showed that Ford, along with crosstown rival General Motors, had zoomed past the foreign competition in initial quality.

In addition to the Taurus and Fusion, Ford has other popular models, including the compact Focus, sporty Mustang and recently introduced Fiesta subcompact. And Ford can expect another boost in sales when its redesigned Explorer hits showrooms later this year. Once one of the most popular vehicles sold in the country, the 2011 Explorer SUV differs dramatically from its stodgy predecessor and gets 30% better gas mileage than the old model, Ford has said. The company is set to formally unveil the new Explorer on Monday.

Ford's corporate strategy maybe winning over customers, but Wall Street remains unimpressed. Shares of the automaker are up about 16% so far this year, to around $11.50 each. But the stock has underperformed even beleaguered Toyota, which has had to battle a continuous flow of safety recalls for nearly a year. Only time will tell if Mulally's plan to revive Ford will finally begin winning over investors as much as he already has car enthusiasts.