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Europe And China May Hurt Ford's Q1 Numbers

 April 26, 2012 01:33 PM

(By R.Chandrasekaran) Automaker Ford Motor Co. (NYSE: F) will announce its first quarter earnings results before the market opens on Friday. The company's results will come on the heels of Fitch rating Ford as investment grade. While North American market will drive the company's sales, European and Chinese market could be a dampener.

For the March quarter, the company reported 9 percent growth in U.S. sales to 539,247 vehicles. Sales were driven by fuel efficient models that surged 78 percent to 66,043 vehicles. Utility sales were up by 6 percent, whereas Escape sales grew 5 percent, which was the strongest first quarter among the best selling utility in the Americas.

[Related -Ford Motor Company (F): What To Watch In Q4 Results?]

Its truck sales advanced 11 percent and its F-Series pickups gained 14 percent on a year-over-year basis. The F-Series has been the top selling truck for three and half decades in the America.

Despite increased sales for the first quarter, Ford had lost market share to rivals such as Chrysler and Kia. In fact, the company's president for the Americas, Mark Fields, hinted earlier this month about a continuous loss in share in the U.S.  Yet, the company believes that strong pricing could offset share losses.

March sales outside of the U.S. paint a different picture. The company's China unit produced a 16 percent drop in sales for March, while South America also witnessed slower sales. Economic ambiguity will continue to impact sales in the European Union.

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Despite year-over-year sales growth, tax rate changes could impact its profitability. The expectation is that corporate taxes could jump to about 30 percent from approximately 9 percent. This is evident in analysts' expectations of lower earnings of 35 cents a share, and revenues of $31.49 billion for the first quarter.

Last year, Ford earned 47 cents a share and revenues of $31.00 billion.

Ford's earnings failed to meet analysts' predictions in for the last four quarters. For the latest quarter, analysts cut their EPS estimates from 40 cents a share two months ago and 42 cents a share three months back.

In the fourth quarter, Ford earned a profit of $13.62 billion or $3.40 a share compared to $190 million or 5 cents a share in the year earlier quarter. However, pre-tax operating profit was $1.1 billion, down 14.7 percent from $1.29 billion and earnings slipped 33.3 percent to 20 cents a share from 30 cents a share in the year-ago quarter.

Revenues were 2.1 percent higher at $34.6 billion than the previous year quarter's $32.5 billion. Wall Street analysts estimated the company would deliver earnings of 25 cents a share on revenues of $32.09 billion.

After the fourth quarter results, shares of Ford have lost 8.3 percent based on April 25 prices, while the S&P 500 advanced 5.5 percent during the same period.

In the 52-week week period, the stock hit a high of $15.70 and a low of $9.05. For the 13 brokerages following F, the highest and lowest price targets for Ford are $18.00 and $13.00 respectively.

Interestingly, no analyst is recommending the stock as a Sell. Fourteen analysts have a Strong Buy or Buy rating, while five analysts' have a Hold rating. Shares of the company closed Wednesday's regular trading at $11.73, which is 9.8 percent lower than analysts' lowest target of $13.00.

Given the last four quarters of performance, Ford's earnings might struggle to meet analysts' expectations due to higher tax rates, and the unfavorable impact from Europe and China. Management's outlook will be keenly watched by investors.



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