Ford's (NYSE:F) demise has been widely predicted, but "greatly exaggerated." Over the last year, despite turning in results sharply lower than in the year-previous periods, the automaker has beaten consensus estimates in three out of four quarters. Can Ford prove the critics wrong yet again when it reports its Q1 2006 numbers? Tune in bright and early tomorrow to find out.
What analysts say:
- Buy, sell, or waffle? Eighteen analysts follow Ford, and seldom have we seen a company so hated. Half of them rate the stock a sell, eight a hold, and only one a buy.
- Revenues. Sales are actually expected to rise 1% year over year, to $39.7 billion.
- Earnings. But profits look headed for a fall, with analysts predicting a 40% drop in per-share earnings to $0.25.
What management says:
Earlier this month, Ford reported March and first-quarter 2006 sales results, boasting of record mid-size sedan sales and continued strength in its F-series truck line. The bad news: Total sales by unit volume were down 3% for the quarter and down 5% for the month (so the sales deceleration is, well, accelerating). The good news is that Ford appears to be gaining market share in one of its more lucrative segments -- full-size pickup trucks -- which suggests that inroads from Honda's (NYSE:HMC) Ridgeline, Nissan's (NASDAQ:NSANY) Titan, and Toyota's (NYSE:TM) Tundra may not be as serious as the auto industry pundits had feared.
What management does:
That suggests there's still hope for Ford and that the analysts may be overly pessimistic. But you must admit they've got good reason for their pessimism, by and large. Over the last 18 months, Ford's rolling gross, operating, and net margins are all down, down, down. Worse, the numbers from back at the tail end of 2004 were already depressed by one-time charges -- and the more recent quarters' numbers are conversely inflated by one-time benefits.
|
Margins % |
9/04 |
12/04 |
3/05 |
6/05 |
9/05 |
12/05 |
|---|---|---|---|---|---|---|
|
Gross |
9.3 |
9.6 |
9.1 |
8.3 |
7.7 |
8.2 |
|
Op. |
3.1 |
3.1 |
2.3 |
1.5 |
0.9 |
1.2 |
|
Net |
1.5 |
2 |
1.6 |
1.5 |
1.1 |
1.1 |
One Fool says:
Reviewing Ford's results back in January, Fool staffer Seth Jayson termed Ford "the least troubling of the potential value plays in the space" based on the fact that the company has a relatively healthy balance sheet and appears willing to make the tough decisions (such as closing factories and selling profitable rental subsidiary Hertz) necessary to get its profits rising again. I'm inclined to agree, and I don't see any major problems with either the firm's accounts receivable or inventory trends, relative to sales growth.
But Fools also need to be aware that the integrity of Ford's balance sheet itself could deteriorate markedly, and rapidly, if the FASB proceeds with requiring that companies list pension liabilities on the balance sheet proper, and not in the footnotes.
Competitors:
- Toyota
- Nissan
- Honda
- Hyundai
- GM (NYSE:GM)
- DaimlerChrysler (NYSE:DCX)
Fool contributor Rich Smith does not own shares of any company named above.
