F Stock: Will Ford Earnings Get the Automaker’s Shares Revving?

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It’s time for another pit stop into earnings season for Ford Motor Company (F), and this time around, F stock holders are hoping things look a little better under the fiscal hood than recent downbeat headlines would suggest.

ford earningsAtop those downbeat headlines was the profit warning issued by Ford last month. The company announced that it expected profit margins in its North America division to be squeezed as the result of product disruptions and the retooling of production facilities in preparation for its new F-150 pickup truck.

Ford also said its earnings are likely to be negatively impacted by weakness, and larger-than-expected losses, in Europe, as well as slow sales in Russia and South America. The company went even further, reducing its pretax profit target for the full year to $6 billion. Ford’s previous guidance was for a pretax profit in the $7 billion-to-$8 billion range.

The bad news for Ford and its shareholders is that the profit warning resulted in a continuation of the slide in the shares that began several months ago. Year to date, F stock is down 8.4%. However, over the past three months, shares have tumbled nearly 21%, as investors decided the auto giant’s stock was just not worth parking in their respective portfolio garages.

That notion could change if Ford earnings manage to materially beat on both the top and bottom lines when the company reports its Q3 results on Friday morning before the opening bell.

Yes, expectations for the quarter, as well as for the full year, have already been lowered by Ford. Quarterly and full-year expectations also have been reduced by analysts, as they revamped their respective outlooks to reflect Ford’s profit concerns.

Here are the numbers I think Ford needs to exceed with conviction if it expects Q3 results to rev up F stock:

In terms of earnings per share, Wall Street consensus is calling for Ford to drive in at 19 cents. That’s way below the stellar 45 cents per share the company earned in the same quarter a year ago. The top line revenue mark has been set at $33.7 billion. That also represents a decline from the $33.9 billion in Q3 last year.

Much like rival General Motors (GM), the numbers in Q3 are only part of the picture for Ford earnings. Nearly of equal value will be what the company has to say during its earnings conference call.

In the case of GM, the focus is on margins. With Ford, the focus will be on the outlook for the biggest cash cow in the automotive universe, the F-150 Series.

The 2015 model year F-150 has undergone a substantive redesign, and the stakes are über high. The new pickup truck eschews the manly steel frame that has helped make the F-150 the best-selling vehicle in America for decades. Instead, the F-150’s frame will be constructed out of aluminum. That will make the vehicle lighter, faster, more fuel efficient, easier to handle — and if Ford executives are right, even more appealing to consumers.

If the word out of Detroit is “all systems go” for the F-150 production and launch later this year, and if the top- and bottom-line metrics can impressive, Friday’s earnings event just might shift F stock into high gear.

As of this writing, Jim Woods did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2014/10/will-ford-earnings-get-automakers-shares-revving/.

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