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Will Surging Sales in Europe Steer Ford's (F) Q2 Earnings?

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Ford’s (F - Free Report) second-quarter 2021 earnings are likely to have benefited from the rising vehicle sales in Europe, a significant market for the company. The company is set to release quarterly results on Jul 28 after the closing bell.

(Also read: Factors Deciding the Fate of Ford This Earnings Season)

Q1 Highlights for Ford’s Europe Market

In the last reported quarter, wholesale unit volumes in the European segment totaled 278,000, down from the 288,000 units reported in the prior-year quarter. Revenues in the European segment came in at $7.1 billion, indicating a rise of 13% year over year. Nonetheless, EBIT totaled $341 million, reversing the year-ago loss of $143 million, thanks to the aggressive restructuring initiatives in Europe.

Europe Market to Beef Up Ford’s Q2 Results

Despite the global semiconductor dearth that the auto industry has been battling, Ford’s second-quarter top and bottom lines are likely to have benefited from the surging vehicle sales, particularly in Europe.

During the second quarter, the company recorded total sales of 242,618 units in the European market, marking a year-over-year jump of 43.7%. Sales volumes in all the key European markets, namely Britain, Germany, Italy, France and Spain, edged up. The Zacks Consensus estimate for second-quarter 2021 revenues and EBIT for the segment is pinned at $5,517 million and $13.6 million, respectively, calling for a surge from the sales of $3,600 million and loss of $664 million reported in the corresponding quarter of 2020.

During the quarter under review, Ford Puma was the top selling passenger car model in Europe, while other popular selling models included Kuga SUV and Ford’s commercial Transit vans. In addition, the Ford Ranger pick-up truck had a breakthrough quarter with almost 16,000 sales.

In a bid to make the Europe segment more profitable and push the development of electric vehicles (EVs) in the continent, Ford’s massive restructuring plan for the region is likely to have reaped positive results for the quarter in discussion. Ford’s aggressive electrification strategy in Europe involves making 100% of its passenger car sales all-electric by 2030 and two-thirds of its commercial vehicle sales all-electric or plug-in hybrid. The auto behemoth’s second-quarter performance is likely to have been boosted by the soaring popularity of EVs. Per Detroit News, 46% of its passenger vehicle sales in the June-end quarter were electrified.

The automaker is, encouragingly, entering a new phase in Europe with primary focus on the development of commercial vehicles and passion specialty passenger cars in the segment, while scrapping off unprofitable model lines.

Pioneering Ford’s goal of an all-electric future in Europe is the $1-billion investment to revamp its vehicle assembly facility in Cologne, Germany, the home of Ford of Europe. The investment will retool the existing vehicle assembly operations into the Ford Cologne Electrification Center for the development of a new EV, Ford’s first such plant in Europe.  

All in all, robust vehicle sales in the European segment, spearheaded by the ongoing restructuring initiatives in the segment, are likely to have fueled the company’s second-quarter performance.

Ford’s Overall Earnings & Revenue Projections for Q2

The Zacks Consensus Estimate for Ford’s second-quarter loss is pegged at 11 cents a share, suggesting a 68.57% wider loss, year over year. Also, the Zacks Consensus Estimate for sales of $21.5 billion calls for 29.34% growth on a year-over-year basis.

Investors should note that our proven model does not predict a conclusive earnings beat for Ford this season. 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.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Ford — which shares space with auto biggies including General Motors (GM - Free Report) , Stellantis (STLA - Free Report) and Toyota (TM - Free Report) — currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.