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Will Ford (F) Disappoint Investors This Earnings Season?

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Ford F is slated to release fourth-quarter 2019 results on Feb 4, after the closing bell. The Zacks Consensus Estimate for the quarter to be reported is earnings of 17 cents per share on revenues of $36.8 billion.

The U.S. auto biggie reported better-than-expected results in the last reported quarter, primarily on the back of higher-than-anticipated revenues from the North American market. As far as earnings surprises are concerned, the company displays a good record of surpassing estimates in three out of the trailing four quarters, with an average positive surprise of 25.9%.

Ford Motor Company Price and EPS Surprise

Ford Motor Company Price and EPS Surprise

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

Investors are expecting an earnings beat for Ford this time as well. However, our model does not indicate the same.

Trend in Estimate Revision

The Zacks Consensus Estimate for third-quarter earnings per share has been upwardly revised by a penny in the past 30 days. However, it indicates a 43% decline from the year-ago reported earnings of 30 cents per share. The Zacks Consensus Estimate for revenues also indicates a year-over-year decline of 3%.  

Factors to Consider

Decline in vehicle sales across all major markets served, including North America, China and Europe, is likely to have weighed on Ford’s sales and earnings in the fourth quarter of 2019. Macro-economic headwinds, tariff woes, increasing popularity of ride-sharing services and rising car prices on the back of technological advancements are likely to have tamed consumer demand for vehicles in the quarter to be reported.

The Zacks Consensus Estimate for revenues in the North American region — which is the most significant market for the company — is pegged at $24,018 million, indicating a decline from the year-ago figure of $25,800 million. Lower vehicle sales in the region amid bleak demand for passenger cars and SUVs are likely to have impacted revenues in the to-be-reported quarter. Demand for passenger cars and SUVs declined 41% and 4.1%, respectively, in the fourth quarter of 2019. Notably, vehicle sales in North America during the fourth quarter totaled 601,862 units, suggesting a 1.3% decline from the corresponding period of 2018.

The Zacks Consensus Estimate for revenues from the European market is pegged at $6,937 million, suggesting a decline from the year-ago reported figure of $7,400 million. Lower wholesale volumes are likely to have negatively impacted the region’s revenues. The company sold 1.33 million vehicles in the European market during the fourth quarter. This represents a 1.4% decline from the year-ago period.

The consensus mark for revenues from the Asia Pacific and African market is pegged at $1,891 million, suggesting a downtick of 47.5% from the year- ago quarter. Weak sales in China, which happens to be its second-biggest market, are likely to have impacted revenues. Notably, vehicle sales in China totaled 146,473 units in fourth-quarter 2019, reflecting a decline of 14.7% year over year.Lackluster economy of China and the long-standing U.S.-Sino trade tiff are likely to have weighed on the firm’s sales in the region.

Ford is expected to incur a pre-tax loss of about $2.2 billion in fourth-quarter 2019 due to pension and other post-retirement employee benefit obligations. This in turn is projected to reduce the firm’s net income by around $1.7 billion, after taxes.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for Ford in the quarter to be reported. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing 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.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -3.03%. This is because the Most Accurate Estimate is pegged a penny below the Zacks Consensus Estimate.

Zacks Rank: Ford currently has a Zacks Rank #4 (Sell).

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:

BorgWarner Inc. (BWA - Free Report) : The firm currently has an Earnings ESP of +1.11% and a Zacks Rank of 3. It is slated to release fourth-quarter 2019 results on Feb 13. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

LKQ Corporation LKQ: LKQ Corp carries a Zacks Rank #3 and has an Earnings ESP of +1.49%. It is slated to release fourth-quarter 2019 results on Feb 20.

Visteon Corporation VC: Visteon carries a Zacks Rank #3 and has an Earnings ESP of +2.63%. It is slated to release fourth-quarter 2019 results on Feb 20.

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