Why Ford Earnings Crushed Estimates

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Ford Motor Co. (NYSE: F) reported first-quarter 2019 results after markets closed Thursday afternoon. For the quarter, the automaker posted adjusted diluted earnings per share (EPS) of $0.44 on revenues of $40.3 billion. In the same period a year ago, the company reported EPS of $0.43 on revenues of $41.96 billion. Analysts were looking for EPS of $0.26 and revenues of $37.08 billion.

The decline in revenue year over year was expected; the battering of analysts’ EPS estimate was not. Even though net income was down by 0.6%, adjusted EBIT margin rose from 5.2% to 6.1%, up about $260 million year over year while special items (most related to announced restructuring steps) nicked profits by about $600 million.

Earlier this month, Ford reported first-quarter sales fell by 1.6% year over year to 590,249 Ford and Lincoln vehicles, compared with first-quarter 2018 sales of 599,581. Passenger car sales fell 23.7% in the quarter while truck sales rose by 4.1% and SUV sales rose 5%.

Ford also reported earlier that sales in its 20 most important European markets dropped by 6.2% year over year in the first quarter and tumbled by 35.8% in China.

North American pretax income in the first quarter rose by $300 million to $2.2 billion and revenue rose by $600 million to $25.4 billion. The company attributed the increases to a higher U.S. market share (up 0.1 percentage points to 13.6%) and improved profits on its F-150 and new Ranger pickups along with the Transit van.

Revenue dropped in South America, Europe, and China regions while remaining flat in the Middle East/Africa region. Market share also declined in the same three regions while rising in the Middle East/Africa region.

CEO Jim Hackett said:

With a solid plan in place, we promised 2019 would be a year of action and execution for Ford, and that’s what we delivered in the first quarter. … Our goal remains to become the world’s most trusted company, designing smart vehicles for a smart world.

Ford has not published a forecast for 2019, but analysts have forecast adjusted EPS for the second quarter at $0.28 on revenue of $35.81 billion. For the full year, the consensus estimates call for EPS of $1.21 on revenue of $145.49 billion.

In after-hours trading Thursday, shares are up about 7.7% at 10.12 in a 52-week range of $7.41 to $12.15. The consensus 12-month price target on the stock was $9.24 before the earnings report was released last night. The dividend yield on the stock is 6.83%.

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