Ford Earnings Cheat Sheet: Firing on All Cylinders

Oct.26.10 | About: Ford Motor (F)

by Eric McWhinnie

Ford Motor Company (NYSE:F) is a worldwide auto company. Ford develops, manufactures, and services car and truck brands such as Ford, Mercury, and Lincoln. The company operates in two main sectors, Automotive and Financial Services. Unlike GM and Chrysler, Ford did not receive a government bailout, nor did it file for bankruptcy. Can Ford generate enough earnings in the Great Recession to avoid the fates of GM and Chrysler?

Earnings: For the third quarter, Ford reported earnings of $1.7 billion ( 43 cents per share). If you exclude one time items, Ford earned 48 cents per share. Despite the weak economy, it was the sixth consecutive profitable quarter for Ford.

Revenue: When compared to prior year, revenue decline 3% ($1 billion) to $29 billion in the third quarter. Last year’s sale of Volvo seems to be weighing on this year’s third quarter results. Ford reported that if you excluded last year’s revenue from Volvo, then revenue would have increased in the third quarter $1.7 billion.

Actual versus Wall Street Expectations: Analysts were expecting around 38 cents per share. Ford’s 43 cents per share in the third quarter was a clear beat. Since prior year’s huge third quarter positive earnings surprise ( 26 cents vs -15 cents), Ford has beat estimates every time.

Notable Stats: Ford is focusing on its debt levels so it can return to an investment grade rated company and reduce its borrowing costs. Ford paid off $2 billion worth of debt in the third quarter. The company also plans on paying its $3.6 billion obligation to the United Automobile Worker health trust early, which isn’t due until 2022.

Did You Hear That? CFO Lewis Booth said, ” Despite the repayments, the company still must continue to work on its balance sheet, paying down debt as it generates operating cash.”

Commentary: Ford took the high road when others in its industry took government bailouts. Ford decided to focus on its products and balance sheet. This focus has resulted in a 68% rise in net income as consumers are willing to pay more for Ford’s new high rated vehicles. Although Ford’s share price is mainly flat after the news, investors may want to hitch a ride to this improving company.

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Disclosure: No position.