Ford Motor Company Earnings: Will Growth Come Back?

On Friday, Ford (NYSE: F  ) will release its quarterly report, and investors have been preparing themselves for a contraction in earnings this year. Yet the bigger question for the automaker is whether it can outpace long-term growth rates at General Motors (NYSE: GM  ) , Toyota Motor (NYSE: TM  ) , and other rivals while maintaining the progress it has made on the quality front. With the introduction this year of 16 new or substantially upgraded product lines, including its new F-series truck line, Ford is sacrificing current earnings for the hope of much larger profits in the future.

Ford has distinguished itself as the only member of the Big Three that didn't need a government bailout to survive the financial crisis. Even as General Motors and Chrysler had some competitive advantages by having gone through the bankruptcy process, Ford nevertheless has sustained its recovery and produced impressive growth over the past five years, and its stock has rebounded convincingly as a result. But can Ford keep up its forward momentum? Let's take an early look at what's been happening with Ford over the past quarter and what we're likely to see in its report.


New F-150. Source: Ford.

Stats on Ford

Analyst EPS Estimate

$0.31

Change From Year-Ago EPS

(24%)

Revenue Estimate

$34.06 billion

Change From Year-Ago Revenue

0.6%

Earnings Beats in Past 4 Quarters

4

Source: Yahoo! Finance.

Have Ford earnings peaked?
In recent months, analysts have cut their views on Ford earnings, reducing first-quarter and full-year 2014 estimates by about 10%. The stock has given up a bit of ground, falling 1% since mid-January.

Most of the decline in Ford's share price came from its fourth-quarter earnings report, at which the automaker announced that while it had produced solid results in 2013, it expected its pre-tax profit to fall anywhere from 7% to 19% in 2014. CFO Bob Shanks blamed expenses related to the new F-series truck introduction, which will require Ford to make extensive modifications at its truck production facilities and suffer more than 20% downtime at its Dearborn plant to make the switch to the new model. In addition, the weaker yen has given Toyota some competitive advantages against Ford and General Motors, even though Toyota has a substantial manufacturing presence in the U.S. that offsets in part the impact of currency moves.

Source: Ford.

But for longer-term investors, 2015 will bring some promising news. If new product launches go well, then profits could soar next year, rewarding patient shareholders. In addition, progress in restructuring and other efficiency improvements in Europe could have the long-struggling geographic segment actually make money in 2015, completely an amazing turnaround that has major ramifications for the entire company.

What has most Ford shareholders excited is the company's new F-150, which uses an aluminum body to cut 700 pounds from the pickup truck and potentially save truck owners thousands of dollars in fuel-cost reductions over a typical lifecycle of a truck. The move is so revolutionary that General Motors is looking to copy it with an aluminum pickup of its own, but Ford should have an extensive period during which it retains its first-mover status.

One area that has Ford investors worried is the imminent departure of CEO Alan Mulally, who helped the company survive the financial crisis and engineered an even longer-term turnaround. But with current COO Mark Fields likely to take over the reins atop Ford's executive suite, there's reason to believe that Mulally's vision will survive his departure and that the hard-earned gains that Ford has made over the years won't fade into the past.

In the Ford earnings report, watch what the company says about the leadership transition and its new-vehicle rollouts. With so much in flux this year, Ford needs to take the opportunity to shift its vision while retaining the success that got it where it is today.

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