Q4 Preview: Ford (F) Could Post Best Quarterly Results in Over a Decade

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Ford Motor Co. ( F ) shares are trading higher ahead of the company's fourth quarter earnings announcement, expected out before the market opens tomorrow. Shares are up2.4% today.

F is expected to report EPS of $0.48 on revs of $30.57 billion. Last quarter, the Dearborn, MI-based automaker posted EPS of $0.48 on revs of $29 billion, topping the Street consensus looking for EPS of $0.38 and revs of $27.83 billion. Looking at Q409, we see that Ford reported EPS of $0.43 coupled with revs of $35.4 billion, again, both beating the consensus estimates.

Shares gained 40.7% through the quarter to $17.25 at the end of December. The stock is up 9.1% since then, and finished 2010 up 67.8%.

A simple valuation puts Ford with a forward P/E of 8.6x FY11 EPS estimates, compared to 9.1x for General Motors ( GM ), 20x for Toyota ( TM ), and 13.4x at Honda Motor ( HMC ).

Data from Bloomberg has 11 analysts with a Buy on F, 6 with a hold, and one suggesting to Sell. The analyst price target average is $20, with a high of $23 and low of $17. Shares have traded in a range of $18.97 - $9.75 over the last 52-weeks.

Summary

  • Deutsche Bank is looking for EPS of $0.42, but sees upside to their estimate, anticipating a more in-line report to the Street consensus. Upside may come from North America, Ford Credit, and a lower-than-expected tax rate.

    DB notes that a key area of focus may be margins going forward. Though Ford has already forecast flat margins Y/Y, Deutsche believes that this may be a little conservative. Pricing and purchased material costs will be on the forefront of their mind this earnings season for Ford. Checks have tires and semiconductors as specific areas of potential increased costs moving into FY11.

    Incentives have largely been benign from Q409.

    Downside risks include: 1) lower-than-expected trajectory of U.S. demand; 2) slower than expected economic recovery; 3) higher-than expected cost increases, potentially due to commodity inflation and/or higher-than forecast growth in engineering / R&D expenses; 4) higher-than-expected cost increases resulting from 2011 UAW contract negotiations.

    Deutsche has a Buy on the stock, with a $21.50 price target.

  • Soleil is lookng for EPS of $0.54, which excludes a one-time charge of 1 billion, about $0.25, related to note conversion. Ford should end FY10 with a positive net cash balance of about $1 billion. Soleil also expects surplus to build in FY11 and FY12. Soleil currently has a Buy rating with $22 price target on the shares.
Not too long ago, Ford also estimated that FY11 sales could exceed 13 million units in the U.S. for automakers.

Should Ford be able to meet Wall Street expectations, it would mark the best year for the company since 1999, in an environment that is arguably unfavorable: high-unemployment, tight credit, an apathetic housing market, and rising commodities prices.

Ford is expected to release their Q411 earnings on Friday, January 28, 2011, at approximately 7:00am EST. Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results withi0 n seconds of their release.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: F , GM , HMC , TM

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