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Ford Rolls But Outlook Curbs Enthusiasm


Ford Motor Co. (F) has been reporting strong sales all quarter, and today’s earnings report finally put some dollar figures to those sales numbers. Ford’s revenues were up $3.7 billion in the quarter, from $24.4 billion in 2009 to $28.1 billion this year. EPS improved by $1.21, from an EPS loss of $0.75 in 2009 to EPS of $0.46 in the 2010 first quarter. Analysts had estimated EPS of $0.31 on revenues of $30.49 billion, so the results were somewhat mixed.

Ford’s revenues did not include sales of Volvo Cars, which the Ford is currently selling to China’s Geeley. Including Volvo, revenues would have reached $32.1 billion.

Ford also reported that its Ford Motor Credit Co. posted net income of $528 million in the first quarter, up from a loss of $13 million in the same period last year. According to The Wall Street Journal, the credit company earnings mean that it will pay Ford $2 billion instead of the $1.5 billion that had been expected. Ford Credit distributed $500 million to its parent on March 31 and noted that it expects 2010 profits to be about equal to 2009’s profits of $2 billion.

Ford’s CFO noted, however, that Ford Credit’s performance could see lower revenues later this year. Partly that’s due to what Ford sees as weaker prices for leased cars that it takes backs and then resells.

Some profit taking and new concerns about the company going forward have caused Ford shares to fall around 4% so far today.

Other drags on the rest of 2010 include higher commodity costs, raising the cost of metals used in manufacturing from an estimated $1,100 to $1,400 per vehicle. Those costs should hit every manufacturer equally, so pressure to continue with incentives programs might ease so the car makers can make some money on each car they sell.

In its outlook, Ford expects total U.S. auto sales to be 11.5-12.5 million vehicles, marking no change from previous estimates. European sales are targeted for 14-15 million vehicles, above previous guidance, but still accounting for European scrappage (“cash-for-clunkers”) programs.

Ford also noted that it has “achieved significant structural cost reductions over the past four years,” but increased demand for vehicles are likely to raise those costs as the company raises production. In other words, Ford has no more to gain from closing plants and firing workers.

Ford’s rather pessimistic comments about the remainder of 2010 are most likely an effort by the company to manage expectations. Indeed, the company did not say anything about paying a dividend — yet. By lowering expectations somewhat the announcement of a dividend later this year would really give the company’s share price a shot in the arm.

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