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What's in the Offing for Ford (F) This Earnings Season?

Zacks Equity Research

Ford F is slated to release third-quarter 2019 results on Oct 23, after the closing bell. The current Zacks Consensus Estimate for the quarter to be reported is earnings of 27 cents per share on revenues of $34.17 billion.

The U.S. auto biggie reported better-than-expected results in the last reported quarter on the back of higher-than-expected revenues from the European 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 18.17%.

Investors are keeping their fingers crossed and excepting that Ford will top earnings estimates this time as well. However, our model does not indicate that the company will beat on earnings in the to-be-reported quarter.

Ford Motor Company Price, Consensus and EPS Surprise

 

Ford Motor Company Price, Consensus and EPS Surprise

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

Which Way are Top and Bottom-Line Estimates Headed?

The Zacks Consensus Estimate for third-quarter earnings per share has been downwardly revised by 2 cents in the past 30 days to 27 cents. This indicates a 6.8% decline from the year-ago reported earnings of 29 cents per share. The Zacks Consensus Estimate for revenues is pegged at $34,174 million, suggesting a fall of 1.4% from the prior-year reported figure.

Factors to Consider

Ford’s increase in SUVs and trucks along with strong vehicle mix, supported by F-series trucks and SUV models including Escape, Explorer, Expedition, EcoSport and Edge, among others — all of which offer hybrid and electric options — are expected to have boosted the company’s performance in the to-be reported quarter.

The Zacks Consensus Estimate for revenues in the North American region — which is the most significant market for the company — is pegged at $22,843 million, indicating an increase from the year-ago figure of $22,300 million. Strong vehicle mix and pricing, along with increasing demand for spacious vehicles are likely to have buoyed revenues from the region. High van sales, including Transit Connect and E-Series, are expected to be reflected in the upcoming results. 

Meanwhile, the Zacks Consensus Estimate for revenues in the European market is pegged at $6,931 million, suggesting a decline from the year-ago reported figure of $7,400 million. Lower wholesale volumes are likely to have impacted the region’s revenues. The Zacks Consensus Estimate of wholesale unit volumes in the region is pegged at 328,000 units, implying a 7.8% year-over-year decline.

Increasing U.S.-Sino tensions and China’s V Emission Standard stock clearance actions are anticipated to have adversely impacted the company’s sales in the region. Ford vehicle sales in China totaled 131,060 units, representing 30.3% year-over year decline.

All in all, while higher revenues in the North American market are likely to have benefited the company, lower vehicle deliveries in China, Europe and Asia Pacific regions might have hampered profits. Further, restructuring costs and high capital outlay are likely to have dented the bottom line and cash flows of the firm.

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 -3.51%. This is because the Most Accurate Estimate is pegged a penny below the Zacks Consensus Estimate.

Zacks Rank: Ford currently has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Here are some companies from the same space, which according to our model have the right combination of elements to post an earnings beat in the to-be-reported quarter.

Tesla, Inc. TSLA has an Earnings ESP of +116.67% and a Zacks Rank #2 (Buy). The company is set to report third-quarter 2019 earnings on Oct 23.

Veoneer, Inc. VNE has an Earnings ESP of +7.17% and a Zacks Rank #2. The company is set to report third-quarter 2019 earnings on Oct 23.

O’Reilly Automotive, Inc. ORLY has an Earnings ESP of +0.23% and a Zacks Rank #3. The company is set to report third-quarter 2019 earnings on Oct 23.

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