Ford Motor Co.
) posted a 34% fall in profit to $797 million or 20 cents per share
(before special items) in the fourth quarter of 2011 from $1.20
billion or 30 cents per share (before special items) in the same
quarter of 2010. With this, the automaker has missed the Zacks
Consensus Estimate by 7 cents per share.
However, including the favorable impacts of valuation allowance
and sale of Ford's Russian operations to the newly created
Ford-Sollers joint venture, which began operations on October 1,
2011, Ford's profit jumped to $13.6 billion or $3.40 per share
during the quarter from $190 million or 5 cents per share in the
fourth quarter of 2010. The improvement was driven by strong
performance in North America and Ford Credit that more than offset
the repercussions from other parts of the world.
Total revenue during the quarter grew 6.5% to $34.6 billion. It
was higher than the Zacks Consensus Estimate of $31.8 billion.
For full year 2011, Ford reported a 19% decline in profit to
$6.12 billion or $1.51 per share (before special items) from $7.58
billion or $1.91 per share in 2010. However, the company's profit
failed to meet the Zacks Consensus Estimate of $1.84 per share.
However, excluding the favorable impact of valuation allowance,
profit in the year stupendously increased to $20.2 billion or $4.94
per share from $6.56 billion or $1.66 per share a year ago.
Revenues in the year increased 13% to $136.3 billion. It was
higher than the Zacks Consensus Estimate of $128.2 billion.
Ford has decided to make profit sharing payments to
approximately 41,600 eligible U.S. hourly employees under the
United Auto Workers (UAW) union agreement. The company's North
American pre-tax profits of $6.2 billion will generate
approximately $6,200 per eligible employee on a full-year
The company already distributed $3,750 per employee in December
2011 for the first-half 2011 results. It will distribute $2,450 per
employee for the second half of 2011 in March this year.
The Ford Automotive segment registered a 7.6% rise in revenues
to $32.6 billion during the quarter. However, pre-tax operating
profit declined 21% to $586 million from $741 million in the fourth
quarter of 2010.
The fall in profit was attributable to higher costs, including
higher commodity costs, rise in compensation costs in North America
related to the new UAW agreement (including the one-time
ratification bonus), and unfavorable exchange rates. These were
partially offset by favorable net pricing and volume/mix.
For the full year, revenues increased 15% to $128.2 billion.
Pre-tax operating profit was $6.33 billion, an improvement of $1.04
billion from $5.30 billion in 2010.
The Financial Services segment reported a 9% dip in revenues to
$2 billion. Pre-tax operating profit fell 11.5% to $506 million
compared with $572 million a year ago. The decrease in profit was
attributable to fewer leases being terminated and the related
vehicles sold at a gain.
For the full year, Ford Credit saw a 16.5% fall in revenues to
$8.1 billion. Pre-tax operating profit was $2.43 billion compared
with $3.00 billion a year ago.
Ford had cash and marketable securities of $22.9 billion as of
December 31, 2011, an improvement from $20.5 billion as of December
31, 2010. Total Automotive liquidity at the year-end was $32.4
billion, including all available credit lines. Total Automotive
debt stood at $13.1 billion as of December 31, 2011 compared with
$19.1 billion as of December 31, 2010.
In 2011, the company's Automotive operating-related cash flow
was $5.6 billion, an increase from $4.4 billion in the prior year.
Capital expenditures rose to $4.3 billion from $3.9 billion in
For full year 2012, Ford expects industry volume (including
medium and heavy trucks) of 13.5 million units-14.5 million units
in the U.S. and 14.0 million units-15.0 million units in the 19
European markets covered by the automaker.
The company expects its 2012 market share in the U.S. and Europe
to be almost same as 2011. Its market share in 2011 was 16.5% in
the U.S. and 8.3% in Europe.
During the year, Ford anticipates Automotive pre-tax operating
profit to improve from 2011. Ford Credit is expected to be solidly
profitable, although at a lower level compared with 2011. Total
company pre-tax operating profit is expected to be almost as same
as in 2011.
Automotive structural costs are expected to increase by less
than $2 billion in order to support higher volumes, new product
launches and global growth plans. Although the company expects an
increase in commodity costs, Automotive operating margin is
expected to increase from 2011.
The automaker expects capital expenditures between $5.5 billion
and $6 billion in 2012 as it continues to invest in product and
We appreciate Ford's product plans and debt reduction strategy.
The benefits from these strategies have already been reflected in
the company's results. However, we are concerned about the
company's higher commodity costs. We are also disappointed with the
company's Financial Services segment results.
As a result, the company retains a Zacks #3 Rank on its stock,
which translated to a short-term (1 to 3 months) rating of Hold.
Consequently, we reiterate our long-term recommendation of Neutral
for the long term (more than 6 months).
General Motors Company
) is expected to release its fourth quarter results on February 20,
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