Ford Results Below Expectations, But Profits the Biggest Since 1998

Ford Motor Co (NYSE:F) declared results for its fourth quarter last week that were below street estimates but rounded off a year that earned the largest annual profit since 1998.

Net income for the quarter, Ford’s eleventh profitable one on the trot, came in at $13.6 billion ($3.40 cents a share) against $190 million (5 cents a share) last year. Adjusting for once-off charges, profit was 20 cents per share, much lower than the 25 cent consensus predicted by 15 analysts polled by Bloomberg. The earnings miss was explained away by CFO Lewis Booth as due to “the external environment, the slightly greater impact than we anticipated of commodity costs, currency and the Thai floods.”

A non-cash adjustment of $12.4 billion, relating to a valuation allowance, boosted net income. Robert Willens, a corporate tax specialist and president of Robert Willens LLC of New York interpreted this move significantly, saying, “They’re telling the world that they’ve attained a level of confidence in their ability to generate substantial amounts of income for the foreseeable future,” said. “It’s quite a positive, forceful statement on their ability to prosper going forward.”

However, Europe continues to be a drag, and according to Booth, Ford is not sure when it will turn around. Pre-tax operating loss at European operations rose to $190 million from $51 million last year. Losses at Asia Pacific and Africa were trimmed from $83 million to $23 million.

North America was profitable with pre-tax operating income rising to $889 million from $670 million last year. Sales during the quarter rose 6.5 percent to $34.6 billion.

Ford has fairly high debt due to its borrowing of $23 billion in 2006 and a recent loan of $300 million from the Dept of Energy, currently standing at $13.1 billion. Pension contributions are on track to cost as much as $3.5 billion this year.

“Ford’s doing everything right except getting their stock price up,” said Gary Bradshaw, a fund manager at Dallas-based Hodges Capital Management, which owns about 250,000 Ford shares. “They’ve got their costs down, good products, good engineering and good leadership. Ford can do surprisingly well this year.”