Ford Accelerates Outlook and Drives Toward Fresh Highs



Ford Motor Co. (NYSE:F) woke up to face the trading day on Thursday and kicked the door down on its way in. Shares climbed as much as 3 percent in premarket trading following the company’s third-quarter earnings report, and shares hit a fresh 52-week high of $18.02 by the time most people were settling into their chairs at the office.

Revenue climbed 12.2 percent on the year to $36 billion, beating the mean analyst estimate of $33.98 billion. Adjusted earnings climbed 12.5 percent on the year to 45 cents per share, beating the mean analyst estimate of 37 cents. Net income — which includes a one-time $250 million restructuring charge and $145 million for a lump-sum payout to retirees — fell 22 percent on the year, to $1.3 billion.

At a glance, Ford’s third-quarter earnings reveal two critical things. First, losses in Europe have narrowed significantly. The region has been a profit drain for several years — Ford is predicting European losses of up to $1.8 billion — and the company has been forced to reduce plant capacity by about 18 percent. Third-quarter pretax losses of $228 million are downright attractive compared to the $468 million lost in the year-ago period. Year-to-date pretax losses are about about $1 billion on a negative 5 percent operating margin.

Second, Ford’s aggressive growth strategy in Asia is working. Ford’s Asia Pacific-Africa segment reported its fifth consecutive quarterly profit, and full-year guidance continues to be for a net gain. Year-to-date pretax earnings are $309 million, which compares against losses of $116 million for the same period in 2012. Turning a struggling, loss-making Asia Pacific-Africa unit into an engine of both profit and growth will be a boon for the automaker.

Importantly, Ford is gaining traction in China, which has arguably become the world’s most-important car market. Ford reported record market share in the country of 4.3 percent, up 0.8 percentage points from last year.

Ford’s performance in the North American market continues to be stellar. Year-to-date wholesales are up 14.7 percent, revenue is up 14.9 percent, and pretax profit is up 9.4 percent. Operating margins did narrow slightly, falling 0.5 percentage points to 10.7 percent.

With all this good news in tow, it’s no surprise that Ford increased its full-year guidance. The company now expects pretax profit to be greater than in 2012, an upgrade from the previous “greater than or equal to” designation. Operating margins are also expected to increase, and automotive operating-related cash flow is expected to be “substantially higher than 2012.”

Year-to-date car sales through September at Ford are up 12 percent at 1.887 million, a growth rate that beats out all its major competitors. For comparison, General Motors’s (NYSE:GM) year-to-date sales are up 7.6 percent at 2.117 million, Chrysler’s year-to-date sales are up 8.5 percent at 1.357 million, and Toyota’s (NYSE:TM) year-to-date sales are up 8.1 percent at 1.698 million.

Ford’s accelerated sales growth has led to increased market share in the United States. This year to date, Ford’s market share has increased from 15.5 percent to 16 percent, gaining ground on General Motors’s leading 18 percent share. Both Toyota and Chrysler’s market share was flat over the same period.

“Ford’s record results in the third quarter show the strength of our One Ford plan around the world,” said Alan Mulally, Ford president and CEO. “Working together, we remain committed to serving customers in all markets with a full family of vehicles, offering the very best quality, fuel efficiency, safety, smart design and value.”

General Motors will report earnings on Wednesday. Analysts are expecting the company to post revenue growth of about 5.1 percent on the year, to $39.59 billion. Earnings are expected to be flat at 93 cents per share.

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