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Ford (F) Earnings Match Expectations, Fourth Quarter Revenue Beat

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Ford Motor Company (F) on Thursday reported fourth quarter fiscal 2016 earnings results that matched Wall Street estimates on the bottom line and beat on top line. Although the company swung to loss during the quarter, this was largely due to pension plans and the company’s decision to cancel its plant in Mexico.

The revenue beat was driven by better-than-expected demand and improving operating results in North America and better profitability in Europe. President Trump earlier this week met with with the “Big three” automakers, including General Motors (GM) and Fiat Chrysler to discuss — among other things — possible tax cuts, which could boost their profits in the quarters and years ahead.

In the three months that ended December, No. 2 U.S. automaker reported a loss of $783 million, or 20 cents per share. The loss was due to a non-cash accounting remeasurement the company announced last week, amounting to $3 billion. However, when adjusting out that remeasurement and other one-time gains and costs, earnings came $2.1 billion, or 30 cents per share, which matched Thomson Reuters estimates. And while that was down 20% year over year, it still represents a record quarter for the company.

Fourth quarter revenue came to $38.7 billion, which grew 2.3% year over year from $37.8 billion, easily beating analyst estimates of $35.2 billion. Notably, the revenue beat was ached despite Ford suffering a 2% decline in U.S. sales and reporting lower global wholesales, including in North America. For the full year, Ford’s operating earnings came to $10.4 billion, topping its own guidance and marking the company’s second-best pretax profit in history.

“The strength of our full-year results across so many parts of the business was really encouraging," CFO Bob Shanks said in a statement. "We had a solid net income, although lower than last year because of our pension remeasurement."

In terms of guidance, Ford maintained an outlook for 2017 that calls for less profit than 2016. The lower forecast could surprise to the upside in 2017, thanks to the meeting with President Trump. CEO Mark Fields told CNBC on Thursday that the meeting with with Mr. Trump was positive. Aside from the proposed tax cuts, Fields was encouraged by the new administration's focus on growing the economy and boosting U.S. manufacturing.

To that end, while Ford shares appear muted to slightly down on the just-released results, any proposed tax cut by Trump, regardless of the amount, would drive Ford’s earnings higher, making Ford stock, which is priced at just eight times fiscal 2017 estimates of $1.63 per share, a bargain at current levels. At around $12.50 per share, Ford stock could easily drive to $15, delivering 20% returns this year. And that’s excellent value when combined with its 4.6% dividend yield.

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


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

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Richard Saintvilus

After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.

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