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Major Factors Influencing Ford's (F) Earnings This Season

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Ford (F - Free Report) is slated to release third-quarter 2021 results on Oct 27, after the closing bell. The Zacks Consensus Estimate for the quarter’s revenues and earnings is pegged at $32.65 billion and 29 cents a share, respectively. 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 363.9%. 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 third-quarter earnings per share has moved up by 2 cents in the past seven days. In the year-ago quarter, it posted earnings of 65 cents per share. The Zacks Consensus Estimate for quarterly revenues suggests a year-over-year decline of 6%.

Factors at Play

Ford's vehicle sales declined year over year amid the global chip crunch, which in turn is likely to have weighed on the firm's revenues. The auto biggie reported third-quarter sales of nearly 400,000 vehicles in the United States, slumping 27% year over year. While sales of the namesake brand sank 26.7%, the same from the Lincoln brand dropped to 17,038 units from the prior-year quarter’s 27,554 units. Consequently, the Zacks Consensus Estimate for quarterly revenues for the North American region — the most significant market for the company — is pegged at $23,073 million, indicating a fall from the year-ago figure of $25,300 million.

Volumes and revenues from the South America market are also expected to have declined during the quarter. In China, Ford’s sales declined 8.7% year over year to 150,100 units amid persistent chip-related challenges, floods in Central China in July and the pandemic-related restrictions in certain parts of the nation. It should be noted that the Zacks Consensus Estimate for total wholesale volume in the automotive segment is pegged at 1,060,000 units, indicating a decline from 1,178,000 units in the year-ago period.

To add to the woes, higher commodity costs, lower earnings by Ford Credit and investments in the Ford+ plan are likely to have weighed on the firm’s operating profits in the to-be-reported quarter. As it is, the U.S. auto giant notified in the last reported quarter that it expects raw material prices to increase $2 billion in second-half 2021 from first-half levels. 

All in all, weaker year-over-year vehicle sales in most of the company’s end markets and escalating expenses are likely to put pressure on Ford’s third-quarter 2021 results.

Earnings Whispers

Our proven 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 +12.28%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: It currently carries a Zacks Rank of 4 (Sell).

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:

Penske Automotive (PAG - Free Report) has an Earnings ESP of +6.64% and currently carries a Zacks Rank #3. The company is set to report third-quarter 2021 earnings on Oct 27.

Sonic Automotive (SAH - Free Report) has an Earnings ESP of +5.51% and holds a Zacks Rank of 2, at present. The company is scheduled to release quarterly figures on Oct 28.

Group 1 Automotive (GPI - Free Report) has an Earnings ESP of +1.52% and carries a Zacks Rank #2, currently. The company’s third-quarter 2021 results are scheduled to be out on Oct 28.