Will Ford (F) Miss Q2 Earnings Estimates on Weak U.S. Sales? - Analyst Blog

By Zacks Equity Research,

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Ford Motor Co. ( F ) is set to report second-quarter 2014 results on Jul 24. Last quarter, it posted a negative 21.87% earnings surprise. However, the automaker managed to beat earnings by an average of 7.22% over the last four quarters. Let us see how things are shaping up for this announcement.

Factors Affecting the Past Quarter

Ford's sales in the U.S. fell 1.8% in the first half of 2014, which is in line the company's expectation of lower 2014 pre-tax profit from the region as compared with 2013. However, sales in China surged 35% year over year in the first half, keeping the company on track to surpass the pre-tax profits of 2013. Even the sales in Europe, which has been incurring losses over recent quarters, improved 6.6% year over year in the first half of 2014.

The sales volumes in various regions will significantly affect Ford's second-quarter earnings. Moreover, structural costs are expected to rise during the quarter due to the ongoing revamp of the product lineup. Further, Ford expects a significant loss from South America in the second quarter of 2014 due to low sales volumes and change in the Venezuelan currency's exchange rate.

Earnings Whispers?

Our proven model does not conclusively show that Ford is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Ford has an earnings ESP of 0.00%. That is because the Most Accurate estimate and the Zacks Consensus Estimate are both at 37 cents per share.

Zacks Rank: Ford's Zacks Rank #3 (Hold) when combined with an ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some companies in the automobile sector you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter:

Gentex Corp. ( GNTX ) has Earnings ESP of +2.08% and a Zacks Rank #1 (Strong Buy). Gentex will report second-quarter 2014 earnings on Jul 24, 2014.

Meritor, Inc. ( MTOR ) has Earnings ESP of +6.67% and a Zacks Rank #2 (Buy). It will release second-quarter earnings results on Jul 31, 2014.

Dana Holding Corporation ( DAN ) has Earnings ESP of +5.77% and a Zacks Rank #2. The company will post second-quarter earnings on Jul 24, 2014.

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FORD MOTOR CO (F): Free Stock Analysis Report

GENTEX CORP (GNTX): Free Stock Analysis Report

MERITOR INC (MTOR): Free Stock Analysis Report

DANA HOLDING CP (DAN): Free Stock Analysis Report

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

This article appears in: Investing , Business , Earnings , Stocks
Referenced Stocks: F , GNTX , MTOR , DAN

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