What’s Next for Ford?

Ford Motor (NYSE:F) dropped 4 percent on Tuesday morning following its fourth-quarter and full-year 2012 financial report. America’s second-largest automaker logged its highest quarterly pre-tax profit in over a decade — $1.7 billion, or $0.31 per share, a 55 percent year-over-year increase — but investors are pulling back in light of an underwhelming forecast for 2013.

Fourth-quarter revenue increased 5.5 percent to $36.5 billion, but full-year revenue dropped 1.5 percent to $134.3 billion. Automotive sector revenue of $34.5 billion, a 5.7 percent year-on-year gain, accounted for 94.5 percent of total revenues. Fourth-quarter automotive operating margin increased 1.6 points to 3.8 percent, but the full-year margin fell from 5.4 percent to 5.3 percent.

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Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 34,580 32,440 33,210 32,170 36,500
Diluted EPS ($) 3.33 0.35 0.26 0.41 0.40

Ford’s overall results were pulled up by its strong performance in North America and weighed down by continued weakness in the European market. Ford North America reported a 12.7 percent increase in revenue to $22.1 billion for the quarter, and a 3.9 point increase in operating margins to 8.4 percent. For the year, Ford North America increased its revenue 6.5 percent, and increased its operating margin 2.1 points to 10.4 percent. All things considered, that’s a good margin.

But there is some downside…