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Ford Motor Co. (F - Analyst Report) posted earnings per share of 31 cents in the fourth quarter of 2013, which is in line with the fourth quarter of 2012 (all excluding special items). With this, the company has surpassed the Zacks Consensus Estimate of 28 cents.
Pre-tax income declined 23.8% to $1.28 billion from $1.68 billion in the fourth quarter of 2012. Net income increased to $3.1 billion or 74 cents per share from $1.6 billion or 40 cents a year ago. Net income for 2013 includes pre-tax special item charges of $311 million and favorable tax special items of $2.1 billion.
Revenues in the quarter grew 3.6% to $37.6 billion, exceeding the Zacks Consensus Estimate of $35.47 billion. The improvement was attributable to increased wholesale volumes in the automotive business.
Fiscal 2013 Results
Ford reported earnings of $1.62 per share in 2013, up from $1.41 per share in 2012. Earnings per share surpassed the Zacks Consensus Estimate of $1.58.
Net income increased to $7.2 billion or $1.76 cents per share from $5.7 billion or $1.42 a year ago. Net income for 2013 includes pre-tax special item charges of $1.6 billion and favorable tax special items of $2.2 billion.
Revenues increased 10% to $146.9 billion from $133.6 billion in 2012, exceeding the Zacks Consensus Estimate of $139.17 billion.
Revenues in the segment grew 3.2% to $35.6 billion, on the back of a 5% rise in wholesale volumes to 1.6 million units, favorable mix and higher net pricing. The increase in volume reflects improved market share in North America and Asia Pacific Africa and higher industry volumes in all regions, partially offset by unfavorable changes in dealer stocks. Pre-tax profit declined 26.8% to $924 million from $1.3 billion a year ago.
In North America, revenues went up 1.8% to $22.5 billion on favorable mix and a 0.7% rise in wholesale volumes to 760 thousand units. The volume benefited from improved U.S.-market share and higher U.S.-industry volumes, partially offset by lower volumes in the non-U.S. markets and unfavorable changes in dealer stocks. However, pre-tax profit was down 9.7% to $1.7 billion. Results were affected by higher costs and lower net pricing, which offset the favorable volume and mix.
In South America, revenues declined 12.9% to $2.7 billion due to unfavorable exchange, volumes and mix, which offset the net pricing gains. Wholesale volumes declined 6.3% to 135,000 units, reflecting plant downtime in Brazil and lower production in Venezuela. Pre-tax loss amounted to $126 million compared with pre-tax profit of $145 million in the fourth quarter of 2012.
In Europe, revenues increased 10% to $7.1 billion although wholesale volumes declined 3% to 318 thousand units. The decrease in volumes was attributable to lower volumes in some markets and unfavorable dealer stock changes. The region had a narrower pre-tax loss of $571 million compared with $732 million a year ago.
In the Asia-Pacific & Africa regions, revenues grew 16% to $3.3 billion, on the back of an impressive 29% rise in wholesale volumes to 397 thousand units. The increased volumes reflected gain in market share, increase in industry volumes and favorable changes in dealer stock. In China, Ford’s market share improved to 4.4%, fueled by strong sales of Kuga and EcoSport.
The region reported pre-tax profit of $106 million, rising from $39 million in the year-ago quarter. The improvement was due to various positive factors, which offset the increase in costs due to investments.
Ford’s Other Automotive – consisting primarily of interest and financing-related costs – revealed a pre-tax loss of $187 million, compared with $62 million in the year-ago period. The loss was attributable to net interest expense, partly offset by a favorable fair market value adjustment on the company’s investment in Mazda Motor.
Revenues in the segment rose 11.1% to $2 billion. Ford Credit reported an 11.1% decline in pre-tax profit to $368 million.
Ford had cash and marketable securities of $25.1 billion as of Dec 31, 2013, an improvement of nearly $0.7 billion from $24.4 billion as of Dec 31, 2012. However, Automotive debt increased to $15.7 billion as of Dec 31, 2013 from $14.3 billion as of Dec 31, 2012.
In 2013, the company’s cash flow from continuing operations increased to $7.7 billion from $6.3 million a year ago. Automotive operating-related cash flows surged 79.4% to $6.1 billion from $3.4 billion a year ago. Capital expenditures increased to $6.6 billion from $5.5 billion in 2012.
Ford expects pre-tax profit, excluding special items, to be in a range of $7 billion to $8 billion in 2014. Automotive revenue is expected to be in line with 2013. However, automotive operating margin and automotive operating-related cash flow are expected to be lower than 2013.
Ford estimates 2014 wholesale volume in North America to be lower than 2013 and net pricing to be unfavorable. Accordingly, the automaker expects 2014 pre-tax profit to be lower than 2013 and operating margin to range from 8% to 9%.
Ford’s South American business is likely to benefit from higher profitability in Brazil and Argentina. However, deterioration in the external environment in Venezuela may negatively impact the results of the company. Thus, Ford expects to report in-line results from South America this year compared to 2013.
In Europe, Ford is undertaking massive restructuring activities. As a result, the company will be incurring restructuring costs and launch costs. Overall, in 2014 Ford expects better results than 2013 and anticipates attainment of profitability in 2015.
In the new Middle East and Africa unit, Ford expects breakeven results in 2014.
In Asia Pacific, Ford guides pre-tax profit to be in line with the 2013 level, as positive transformation in the region is offset by investment costs, weak results in Australia, production constraints and a competitive pricing environment.
Moreover, the automaker expects that Ford Credit’s profits in 2014 will be in line with the 2013 level.
Other Stocks to Consider
Ford currently carries a Zacks Rank #5 (Strong Sell). Some better-ranked automobile stocks worth considering are Tesla Motors, Inc. (TSLA - Analyst Report), Harley-Davidson, Inc. (HOG - Analyst Report) and Dongfeng Motor Group Company Ltd (DNFGY). All these stocks carry a Zacks Rank #2 (Buy).