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Factors Deciding the Fate of Ford (F) This Earnings Season

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Ford (F - Free Report) is slated to release second-quarter 2021 results on Jul 28, after the closing bell. The Zacks Consensus Estimate for the quarter’s loss is pegged at 11 cents a share. The U.S. auto biggie delivered better-than-expected earnings in the last reported quarter on higher-than-anticipated revenues, primarily in Europe and North America markets. The company surpassed estimates in each of the trailing four quarters, with the average being 327.4%. This is depicted in the graph below:

Ford Motor Company Price and EPS Surprise

Ford Motor Company Price and EPS Surprise

Ford Motor Company price-eps-surprise | Ford Motor Company Quote

Trend in Estimate Revisions

The Zacks Consensus Estimate for Ford’s second-quarter loss per share has narrowed by 16 cents in the past seven days. In the year-ago quarter, it incurred a loss of 35 cents per share. The Zacks Consensus Estimate for quarterly revenues suggests a year-over-year improvement of 36.3%.

Factors at Play

U.S. vehicle sales in second-quarter 2021 managed to maintain an upward trajectory on the back of high demand for cars amid preference for personal mobility, easier credit conditions, and economic recovery buoyed by stepped up inoculation drive as well as massive fiscal stimulus. These factors are likely to have boosted Ford’s results in the quarter to be reported from second-quarter 2020, a period that was severely impacted by pandemic woes. As such, the company’s U.S. sales totaled 475,327 vehicles, up 9.6% from the year-ago period. The Zacks Consensus Estimate for quarterly revenues for the North American region — the most significant market for the company — is pegged at $14,857 million, indicating an improvement from the year-ago figure of $10,900 million.

However, the global shortage of semiconductor chips caused significant production cuts and inventory constraints for the auto biggie in second-quarter 2021, causing sequential decline in sales volumes and revenues. The Zacks Consensus Estimate for total wholesale volume in the automotive segment is pegged at 803,000 units, up from 645,000 units in the year-ago period but down from 1,062,000 units in first-quarter 2021. The consensus mark for Ford’s total revenues in the automotive unit stands at $22,656 million, indicating 36.3 year-over-year growth but 32.5% sequential decline.

The company warned during first-quarter 2021 earnings call that microchip shortfall would slash second-quarter output by 50%. Amid the chip dearth, Ford’s U.S. sales for June tumbled 26.9% on a yearly basis, with the F-Series sales dropping nearly 30% from June 2020.

Last month, the company provided an update on financial outlook for second-quarter 2021. While it projects second-quarter EBIT to rise from the year-ago level, net income for the quarter under discussion is anticipated to be substantially lower than the year-ago period. This is because the company had managed to reap $1.1 billion in profit in second-quarter 2020, thanks to a one-time, $3.5-billion gain on its investment in self-driving vehicle technology company Argo AI.

Earnings Whispers

Our proven Zacks model does not conclusively predict an earnings beat for Ford this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that is not the case here as elaborated below.
 
Earnings ESP: The company has an Earnings ESP of -16.28%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: It currently sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

Here are a few auto stocks worth considering, as these have the right combination of elements to come up with an earnings beat this time around:

Allison Transmission (ALSN - Free Report) has an Earnings ESP of +0.08% and carries a Zacks Rank #3 at present. The company is set to announce second-quarter 2021 results on Jul 28.

American Axle & Manufacturing (AXL - Free Report) has an Earnings ESP of +275.00% and holds a Zacks Rank #3 at present. The company is scheduled to announce second-quarter 2021 results on Jul 30.

Tenneco  has an Earnings ESP of +9.34% and carries a Zacks Rank #3 at present. The company is slated to announce second-quarter 2021 results on Aug 5.

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