Ford Motor Co. (F Quick QuoteF - Free Report) posted adjusted earnings per share of 52 cents in the second quarter of 2016, 2 cents lower than the figure recorded in second-quarter 2015 (excluding special items). Moreover, earnings per share missed the Zacks Consensus Estimate of 60 cents. Pre-tax income (excluding special items) was $3 billion, $293 million lower than the year-ago quarter figure.

Net income attributable to Ford was $2 billion, compared to $2.16 billion recorded in the year-ago quarter.

Revenues in the reported quarter increased to $39.5 billion from $37.3 billion in the year-ago quarter. Also, the figure outpaced the Zacks Consensus Estimate of $36.62 billion.

Ford Automotive: Revenues in the segment went up 5.2% year over year to $36.9 billion in the second quarter of 2016. Wholesale volumes decreased 2,000 units to 1.69 million units. Pre-tax profit declined to $2.8 billion from $2.96 billion a year ago, due to unfavorable exchange rate, partially offset by improved cost performance.

In North America, revenues advanced 2% to $23.8 billion. Wholesale volumes were almost in line year over year at 815,000 units. Further, pre-tax profit declined to $2.7 billion from $2.8 billion due to higher Ford and industry incentive.

In South America, revenues plunged 17% to $1.3 billion. Wholesale volumes fell 15% to 83,000 units. Pre-tax loss amounted to $265 million, wider than a pre-tax loss of $185 million in the prior-year quarter due to inflation, lower volume and weaker local currencies net of pricing.
 
In Europe, revenues increased 16% to $8.1 billion. Wholesale volumes grew 11% to 430,000 units. The region recorded a pre-tax profit of $467 million, compared to a pre-tax profit of $161 million a year ago. The improvement was driven by lower costs and favorable volume and mix.

In the Middle East & Africa segment, revenues were almost flat year over year at $1 billion. Wholesale volumes fell 14% to 38,000 units. The region reported a pre-tax loss of $65 million compared to $46 million in the year-ago quarter.

In the Asia-Pacific region, revenues increased 17% year over year to $2.8 billion. Meanwhile, wholesale volumes dropped 6% to 328,000 units. Market share in the region was 3.6%, compared to the year-ago level of 3.9%.

The Asia-Pacific region reported a pre-tax loss of $8 million, as against a pre-tax profit of $194 million in the year-ago quarter. The decline was due to lower performance in China market and weaker yuan.

Ford’s All Other – consisting primarily of net interest expense – reported a pre-tax loss of $224 million compared with $57 million in the year-ago period.

Financial Services

Ford Credit reported a 20.9% decrease in pre-tax profit to $400 million in the second quarter of 2016 due to lower auctions values on lease residuals and credit losses.

Financial Position

Ford had cash and cash equivalents of $17.06 billion as of Jun 30, 2016, up from $14.27 billion as of Dec 31, 2015. Automotive debt increased to $13.1 billion as of Jun 30, 2016, from $12.8 billion as of Dec 31, 2015.

In the first half of 2016, the company’s cash flow from continuing operations increased to $11.8 billion from $7.6 billion a year ago. Automotive operating-related cash flows improved to a record $6.9 billion in the first half of 2016 from $4.5 billion reported in the year ago period. Capital expenditures declined to $3.2 billion from $3.5 billion in the first half of 2015.    

2016 Guidance

Ford reaffirmed its guidance for 2016. It expects 2016 pre-tax profit, earnings per share, automotive revenue and automotive operating margin to be equal to or higher than 2015 levels. The company also anticipates recording strong automotive operating-related cash flow, albeit below 2015 levels.

Ford estimates 2016 pre-tax profit in North America to be almost the same as the 2015 level of $9.3 billion. The company expects operating margin in North America to be 9.5% or higher, compared with 10.2% recorded in 2015.

Further, Ford expects to report higher loss from South America compared to a loss of $832 million in 2015. In Europe, the company anticipates higher profits compared to $259 million recorded in 2015. In the Middle East and Africa unit, Ford expects to record equal or greater profits compared to $31 million in 2015. In the Asia-Pacific, Ford estimates pre-tax profit to be higher than the 2015 level of $765 million.

Moreover, the automaker expects that Ford Credit’s profits in 2016 will be in line with or higher than the 2015 level of $2.1 billion.

Zacks Rank

Ford currently carries a Zacks Rank #4 (Sell).

Some better-ranked automobile stocks include Spartan Motors Inc. , Johnson Controls Inc. (JCI Quick QuoteJCI - Free Report) and Gentex Corp. (GNTX Quick QuoteGNTX - Free Report) , each carrying a Zacks Rank #2 (Buy).

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