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Ford's (F) Q1 Earnings Beat Estimates, View Reaffirmed

Ford Motor Co. F posted adjusted earnings per share of 68 cents in the first quarter of 2016, 39 cents higher than the figure recorded in first-quarter 2015 (excluding special items). Moreover, earnings per share surpassed the Zacks Consensus Estimate of 43 cents. Pre-tax income (excluding special items) increased to a record $3.84 billion from $1.78 billion in the year-ago period.

Including special items, net income attributable to Ford was $2.5 billion compared with $1.2 billion a year ago.

Revenues in the reported quarter increased to $37.7 billion from $33.9 billion in the year-ago quarter. Moreover, the figure outpaced the Zacks Consensus Estimate of $36.10 billion.

Ford Automotive

Revenues in the segment went up 11% year over year to $35.2 billion in the first quarter of 2016. Wholesale volumes grew 10% to 1.72 million units. Pre-tax profit increased to a record $3.3 billion from $1.3 billion a year ago, backed by improvements in North America, Europe and the Asia-Pacific.

In North America, revenues advanced 19% to $23.9 billion. Wholesale volumes improved 20% to 814,000 units. Further, pre-tax profit surged 96% to a record $3.1 billion due to the favorable impact of volume/mix and contribution costs, partly offset by the unfavorable impact of changes in structural costs, net pricing and exchange rate. Strong fleet sales of the SUV line-up, Transit and F-150 helped boost market share.

In South America, revenues declined 44% to $0.8 billion. Wholesale volumes fell 38% to 63,000 units. Pre-tax loss amounted to $256 million, wider than a pre-tax loss of $189 million in the prior-year quarter due to lower industry sales, particularly in Brazil.

In Europe, revenues were consistent with the year-ago level of $6.9 billion, while wholesale volumes grew 6% to 399,000 units. The region recorded a pre-tax profit of $434 million, versus a pre-tax loss of $42 million a year ago. The improvement was due to lower costs and favorable volume and mix.

In the Middle East & Africa segment, revenues declined 9% to $0.9 billion. Wholesale volumes fell 2% to 46,000 units. The region reported a pre-tax loss of $14 million, versus a pre-tax profit of $79 million in the year-ago quarter.

In the Asia-Pacific region, revenues increased 18% year over year to $2.7 billion. Meanwhile, wholesale volumes grew 9% to 398,000 units. Market share in the region was 3.6%, a rise from the year-ago level of 3.3%. In China, Ford’s market share improved 0.2 percentage points to 4.5%.

The Asia-Pacific region reported a pre-tax profit of $220 million, surging 110% from $105 million in the year-ago quarter. The improvement was driven by higher volume and favorable mix.

Ford’s Other Automotive – consisting primarily of interest and financing-related costs – reported a pre-tax loss of $126 million compared with $212 million in the year-ago period.

Financial Services

Ford Credit reported a 6% increase in pre-tax profit to $514 million in the first quarter due to favorable volume and mix as well as better financing margin.

Financial Position

Ford had cash and marketable securities of $24.3 billion as of Mar 31, 2016, up from $23.6 billion as of Dec 31, 2015. Automotive debt increased to $13 billion as of Mar 31, 2016, from $12.8 billion as of Dec 31, 2015.

In the first quarter of 2016, the company’s cash flow from continuing operations increased to $3.6 billion from $1 billion a year ago. Automotive operating-related cash flows improved to a first-quarter record of $2.7 billion from $0.5 billion a year ago. Capital expenditures declined to $1.5 billion from $1.8 billion in the first quarter of 2015.           

2016 Guidance

Ford expects 2016 pre-tax profit, earnings per share, automotive revenue and automotive operating margin to be equal to or higher than 2015 levels. The company also anticipates recording strong automotive operating-related cash flow, albeit below 2015 levels.

Ford estimates 2016 pre-tax profit in North America to be almost the same as the 2015 level of $9.3 billion. The company expects operating margin in North America to be 9.5% or higher, compared with 10.2% recorded in 2015.

Further, Ford expects to report higher loss from South America compared to a loss of $832 million in 2015. In Europe, Ford anticipates higher profits compared to $259 million in 2015. In the Middle East and Africa unit, Ford expects to record equal or greater profits compared to $31 million in 2015. In the Asia-Pacific, Ford estimates pre-tax profit to be higher than the 2015 level of $765 million.

Moreover, the automaker expects that Ford Credit’s profits in 2016 will be in line with or higher than the 2015 level of $2.1 billion.

Zacks Rank

Ford currently carries a Zacks Rank #3 (Hold). Some better-ranked automobile stocks include Federal-Mogul Holdings Corporation FDML, Superior Industries International, Inc. SUP and Lear Corp. LEA. Each of these stocks sports a Zacks Rank #1 (Strong Buy).

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FORD MOTOR CO (F): Free Stock Analysis Report
 
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