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5 Market-Moving Earnings Reports Analyzed

An in-depth look at the companies that reported this week

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This earnings season has been a busy one. Last week I gave you an idea of what to expect from some of the most notable companies reporting earnings. Here’s the epic conclusion for the majority of them:


Ford (NYSE:F) reported a profit of $20.2 billion for 2011 — its third straight annual profit — but posted Q4 earnings of 20 cents a share, which was 5 cents below expectations and less than the 30 cents earned a year ago.

Earnings were hurt by higher materials prices, and, to a lesser extent, one-time costs associated with its new four-year agreement with the United Auto Workers that locked in U.S. labor costs for an extended period at favorable rates. Higher materials prices especially hurt Ford’s challenged European unit, where the operating net loss increased to $190 million from $51 million — despite sales increasing to $8.3 billion from $8.1 billion on improvements from volumes and revenue mix. The Asia Pacific segment lost $83 million on lower volume and fallout from flooding in Thailand.

North American operations fared better, earning $889 million — a nice bump up from $670 million a year ago with U.S. sales rising 11% for the year. Management expects higher automotive production in North America in 2012, estimating industry-wide production to be 13.5 million to 14.5 million units — up from 13 million units in 2011 and a similar forecast to the one given recently by rival General Motors (NYSE:GM).

Guidance for 2012 was roughly in line with expectations. The company expects better automotive profit but also looks for a decline in European productions from 15.3 million units to 14.0 million — 15 million units. Ford believes its financial services segments will remain highly profitable, but less so than last year due to lower interest rates. The company is also projecting little change in net interest income and believes pretax operating profit in 2012 will be close to last year’s levels, so we’re likely to see 2012 earnings somewhere around 2011’s $1.51 a share.

One other note: Ford reported this week that North American vehicle sales in January increased 7%. Strength was well-balanced, with the small car Focus sales up 60%, accounting for 30% of the growth. Also strong was the F series — up 8% — helped by the addition of a more fuel efficient V-6 engine. The company did not change previous guidance of a 3% increase in North American production so, as expected, domestic operations are solid at Ford.

Shares hit a six-month high around $13 before the earnings report and then dipped briefly under $12. They’ve moved higher since and are still up almost 18% to start 2012. Despite the short-term disappointment, Ford is moving forward with aggressive goals for 2015 that portend further improvement — driven by growth in its Asia Pacific operations. I definitely would buy F on pullbacks. 

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