Ford Motor Company (F 0.17%) will present its first-quarter 2018 earnings results after the bell on Wednesday, April 25. What should we expect?

What Wall Street expects

Wall Street analysts polled by Thomson Reuters expect Ford to report earnings of $0.41 per share, on average, up from $0.39 per share in the first quarter of 2017. They also expect Ford's first-quarter revenue to increase, to $37.06 billion from $36.48 billion a year ago.

Setting the stage: Ford's guidance

Back in January, CFO Bob Shanks said that while he expects Ford's full-year 2018 revenue to be about the same as 2017's, or a little higher, its adjusted earnings per share will likely fall to between $1.45 and $1.70 from $1.78 in 2017.

Why the decline? Shanks pointed to four different factors likely to put pressure on Ford's earnings in 2018:

  • Rising prices for key auto-making commodities, like aluminum and steel.
  • Unfavorable exchange-rate movements.
  • Rising interest rates, which will squeeze Ford Credit's margins to some extent.
  • Increased spending, particularly on self-driving vehicles and Ford's future-mobility efforts.

All of that, he said, will likely be offset to some extent by continued strong sales of Ford's high-profit trucks and SUVs -- but only to some extent.

A red 2018 Ford F-150 pickup truck on a country road.

Sales of Ford's hugely important F-Series pickups were pretty good in the first quarter. But a lot of other things were not so good. Image source: Ford Motor Company.

Ford's first-quarter sales were mostly disappointing

Ford struggled in all three of its key regional markets in the first quarter. In the U.S., sales fell 2.9% in the first quarter, as a 4.3% increase in sales for its F-Series pickups wasn't enough to offset declines in several of its now-dated SUV models.

In Europe, where small cars still sell very well, Ford's sales fell 3.8% in the first quarter despite the successful launch of an all-new version of its big-selling Fiesta. Ford has an all-new Focus on the way in Europe, which should help. But again, new crossover SUVs would help more, and they're at least a year away.

And in China, things have been absolutely dismal for Ford. The Blue Oval's sales in the Middle Kingdom fell 19% in the first quarter, as its executives in the region scramble to implement a turnaround strategy announced in December.

So why do analysts think Ford's EPS will rise?

First of all, it's a favorable comparison -- the first quarter of 2017 was a tough one for Ford. A year ago, Ford's net income fell 36% from the year prior on new-product spending and a series of expensive recalls. At least in theory, that result shouldn't be too hard to beat.

There might -- might -- be more to the story.

You'll recall that Ford got a new CEO after that quarter: In a surprise move, Jim Hackett took over from Mark Fields in May 2017. From the beginning of his tenure, Hackett has emphasized the need to improve Ford's "fitness" by reining in rising costs and improving profitability.

Those costs have become a problem, squeezing Ford's once-strong margins. Ford's automotive operating margin fell to just 5.4% in 2017. Ford's 5.4% 2017 automotive operating margin didn't just trail General Motors8.8% margin for the year, it also fell behind Fiat Chrysler Automobiles'. FCA has struggled with profitability, but it managed a nice 6.4% result in 2017.

Hackett argues, quite reasonably, that given the tremendous strength of its F-Series pickup line and SUV nameplates, Ford should be doing a lot better. He has begun making changes to boost the Blue Oval's profitability, rethinking its lower-profit sedan lineup and initiating the development of more higher-margin SUV models. Overall, Hackett plans to shift about $7 billion in future-product spending away from small cars and sedans and into higher-profit truck and SUV models.

But did that have any impact in the first quarter?

It's possible there was a small effect. Shanks told me not to expect much from Hackett's cost- and margin-improvement moves until 2019. But there may have been enough to produce a small EPS increase from last year's disappointing result.

If I had to guess, I'd say that Ford will beat Wall Street's EPS and revenue estimates by small margins. We'll find out on Wednesday afternoon.