Ford Earnings: An Early Look

With hundreds of companies having already reported quarterly results, we're now in the heart of earnings season. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed kneejerk reaction to news that turns out to be exactly the wrong move.

Let's turn to Ford (F 0.69%). The automaker has come back in the past four years from the brink and has beaten its Big 3 rivals by avoiding bankruptcy in the process. But can the company keep moving forward? 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 quarterly report on Tuesday.

Stats on Ford

Source: Yahoo Finance.

Will Ford keep driving higher?
Analysts have seen Ford's earnings prospects as solid all quarter, with the EPS estimate barely changing at all. But that hasn't stopped investors from being incredibly optimistic, as the shares have risen by more than 30% since late October.

For the most part, Ford has done an excellent job of justifying the big rise in its stock price since its 2009 lows. CEO Alan Mulally and his One Ford approach has involved restructuring to maximize profitability and efficiency as well as emphasizing quality product development and improving its financial situation. Investors got a huge vote of confidence on that front earlier this month, when Ford doubled its dividend just a year after paying its first reinstated dividend since before the financial crisis.

But not everything has gone right for Ford lately. In response to the relative failure of its Lincoln division, Ford has started to push back against General Motors' (GM 1.20%) Cadillac division as well as foreign competitors by re-emphasizing luxury. You won't see the impact of a massive advertising campaign on fourth-quarter results, but look for discussion of the strategy going forward and its potential impact on overall sales.

One thing you will see is news about Europe, where Ford's problems are likely to continue for a while. GM has suffered equally bad losses there, and Ford has a long-term plan to turn things around there. But until European economies get past their current malaise, it'll be hard for Ford to make headway.

By contrast, Ford and GM have made significant gains in China, holding their ground even as Toyota (TM -3.23%) and Honda (HMC -2.21%) have recovered from tsunami-related disruptions. With Japan and China in a territorial dispute, anti-Japanese consumer backlash in China has favored Ford, and if that lets the company get better established there, then the effects could be felt for years.

As important as continuing earnings and sales growth is for Ford, the key to its earnings report will be its future outlook. If it continues to show promise in executing on its successful long-term plans, Ford will remain a stock worth owning.

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