Is a Surprise in Store for Ford (F) this Earnings Season? – Yahoo Finance

Posted: Tuesday, April 25, 2017

Ford Motor Co. F is set to report first-quarter 2017 results on Apr 27. Last quarter, the company missed estimates by 6.25%. The automaker has managed to beat earnings in two of the trailing four quarters, delivering an average positive surprise of 15.59% over this period.

Let’s see how things have shaped up for the forthcoming announcement.

Ford Motor Company Price and EPS Surprise


Ford Motor Company Price and EPS Surprise | Ford Motor Company Quote

Factors Influencing this Quarter

Ford is focused on expanding its production capacity in many emerging markets, promoting the use of electric vehicles for long distance travel and development of autonomous vehicle technology. Moreover, the company expects to improve its performance in 2017 compared to the loss of $302 million in 2016 in its Middle East and Africa units. Ford also expects significant cost synergies in the region.

The company has also been witnessing sales improvement in Europe. Sales in 20 of its traditional European markets (Euro 20) rose 9.4% year over year to almost 0.4 million vehicles in the first three months of 2017. The total Euro 50 sales also increased 8.3% from the prior-year period in the quarter. This should significantly drive revenues as well. Also, Ford’s impressive product launches are helping boost sales volume. 

However, Ford is witnessing weak sales volumes in two of its major markets. The company’s U.S. sales declined 4.4% year over year to 0.62 million units in first-quarter 2017. Ford’s China sales also fell 19% year over year to 0.26 million units in the quarter. Excluding Lincolns, the company’s sales in the country declined 21% from the prior-year quarter. Ford discontinued its operations in Japan and Indonesia in 2016 and is facing sluggish demand in South America.

The company expects first-quarter adjusted earnings per share in the range of 30–35 cents, lower than 68 cents reported in the prior-year quarter. The low expectations stem from increased costs, lower volumes as well as unfavorable currency translation. The company also expects headwinds of $400–$500 million in 2017 and 2018 due to Brexit. In addition, the company’s adjusted pre-tax profits and adjusted earnings per share are likely to decline in 2017 from 2016 levels.

Ford underperformed the Zacks categorized Auto Manufacturers-Domestic industry in the last three months. This was mainly because of weak operating forecasts for 2017 and declining U.S. sales. Ford’s share price decreased 7.7% over this period, while the industry saw a 1.2% fall.

Earnings Whispers

Our proven model does not conclusively show an earnings beat for Ford this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP: Ford’s Earnings ESP is 0.00% because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 34 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Ford carries a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

CNH Industrial N.V. CNHI has an Earnings ESP of +33.33% and a Zacks Rank #2. The company is expected to report first-quarter 2017 results on Apr 27. You can see the complete list of today’s Zacks #1 Rank stocks here.

Autoliv Inc. ALV has an Earnings ESP of +1.97% and a Zacks Rank #3. The company’s first-quarter 2017 financial results are scheduled for release on Apr 28.

Delphi Automotive PLC DLPH has an Earnings ESP of +2.06% and a Zacks Rank #2. The company is scheduled to report first-quarter 2017 financial numbers on May 3.

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