What to Expect From Ford $F Earnings This Week

Ford Motor Company $F reports its second-quarter 2017 earnings result on Wednesday before the market open. This week the other big 3 Auto makers $GM and $FCAU also report.

Ford Motor Company (F) reports its second-quarter 2017 earnings results on Wednesday before the market open.  Here’s a look at what to expect.

It has been a difficult year for car makers. Car sales continued to soften in June BUT Ford wasn’t as bad as expected, falling 5.1% to 227,979 units in June v -9.3% expected by Kelley Blue Book.  Importantly sales of higher-profit Ford SUVs and F-Series trucks  were both strong.

Consensus Estimates Analysts polled by Thomson Reuters expect from Ford $0.44 earnings per share on revenue of $37.01 billion. The same quarter a year ago was $0.52 EPS (excluding special items) on revenue of $39.5 billion. 

The big 3 dealer inventory glut is expanding. The big three automakers General Motors (GM), Ford (F) and Fiat Chrysler (FCAU) sales are indicative of consumer interest, potential jobs and manufacturing. False economies have a downside, auto sales have been downhill since. Higher interest rates and vehicle price rises has altered buyer patterns as they are also opting for longer loans, meaning they won’t be buying as soon. Auto sales have slowed with shaky consumer confidence, a glut of used cars and credit tightening as delinquencies and defaults gather speed. There is also the ‘Tesla effect’ where consumers are worried about obsolescence with new technologies such as electric and driver-less cars.

Look for New CEO Hackett Strategy

In May Ford appointed Jim Hackett as CEO. This will be the first opportunity to hear from Hackett since he took over as CEO.  There is optimism from when he was at Steelcase he led a turnaround and high-tech reinvention. At the same time Ford has changed a number of senior management. Hackett intends to “decisively” business segments that are underperforming and ensure there  is the right culture in plac


Ford’s sales in China rose 7.5% in the second quarter after cutting prices to compete with the low-cost domestic Chinese car makers. A positive was Lincoln models sales , which have a higher profit have been rising. 

What Analysts Think

Bank of America Merrill Lynch in Friday issued a note warning about a “swift and material downturn” in U.S. auto sales. BofA Merrill Lynch sees  a “tsunami” of off-lease used cars hitting prices. They project auto vehicle sales falling to a 13 million unit annual rate by around 2021.

They also see the potential of raw material costs increasing hurting margins. In the note Bank of America Merrill Lynch cut the automotive sector across the board.

– Lithia Motors (LAD) cut to underperform, $LAD fell 8.7% to close at 88.57 Friday.
– Sonic Automotive (SAH) fell 7.9% and Group 1 Automotive (GPI) fell 4.2% Friday 
– Used-car dealer CarMax  fell 1.4% Friday
– Ford Motor (F) fell 0.2%, General Motors (GM) fell 0.9% and Fiat Chrysler (FCAU) were off 0.7% on reduced price targets 
– Parts supplier Magna International (MGA) lost 3.9% and Delphi Automotive (DLPH) lost 1%.

Over at Morgan Stanley, analyst Adam Jonas cut his 2017 sales estimate to 17.3 million from a prior view of 18.3 million. By 2019 Jonas expects annual sales  pulling back all the way to the 2013 level of 15 million against previous  earlier estimates of 19.2 million. A massive 4.3 million autos.

Source: Reuters, Edmunds, TradersCommunity Research Desk

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