Ford Revving Up Profits

Ford (NYSE:F) most profitable since 1998. The company could report income over $20 billion. Ford is putting an end to a valuation allowance for tax deferred benefits it no longer needs according to Robert Willens, president of Robert Willens LLC from New York.

The move is a non-cash gain says corporate tax specialist, Willens, but, “Investors need to focus on the statement Ford is making and forget the big accounting journal entry…This is a statement from Ford that they have a high level of confidence in their ability to generate copious amounts of income for the foreseeable future.”

Markets are still weak in Europe, but Ford is competing with Japanese brands in North America. In fact, it appears that other competitors are trying to imitate Ford technology and pricing.

None of this has been lost on consumers. Ford’s average vehicle price last year was up 25 percent from 2002 according to Edmunds.com.  The redesigned Ford Fusion has sales up 20 percent for this year. While the company upped it prices, it didn’t skip on icing.  Fuel efficiency and voice-activate technology are helping boost sales.

Investors have been concerned about Ford’s tax rate. Brian Johnson, Barclay’s Capital analyst, says he has been in losing a battle trying to get investors to understand Ford’s tax position. “The valuation allowance is not a positive because it gets people focused on an artificially high tax rate that leads to an EPS that doesn’t reflect the underlying cash earnings power of the company.” Johnson rates Ford Overweight.