What To Expect From Ford’s Second-Quarter Results

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Ford Motors (NYSE: F) will release its second-quarter results and conduct a conference call with analysts on July 25, 2018. Consensus market estimates expect the company to report an EPS (Non-GAAP) of $0.36, almost 36% lower than the reported figure a year ago, whereas revenue is expected to remain relatively flat at $36.86 billion. Comparatively weaker performance in China is expected to remain a major setback for the company’s results in the second quarter, however, a proportionately higher volume sales of SUVs and pickups in the company’s U.S. market is likely to offset this impact to a certain extent. Additionally, Ford’s overall performance in the second quarter is likely to be weakened by cost headwinds as rising raw material costs would continue to weigh on the company’s bottom line.

Ford has been struggling to increase volume sales in China since last year. Ford’s cumulative 6-month sales in China stood at 400,443 units and was down by 25% year-on-year (y-o-y) in 2018. The decline in sales reflects Ford’s inability to provide newer models to the market and the “fierce competition” faced by the company from the local Chinese brands. Although Ford has plans to introduce newer models, these models would not be hitting showrooms until next year. Consequently, the company expects to incur a loss in its Asia Pacific (APAC) region in the second quarter (similar to Q1’18), with declining sales and added engineering and marketing costs weighing on results.

Ford’s U.S. operations, on the other hand, are expected to benefit from the increased volume sales of their SUV and pickup variants in the first half of the year. Although Ford’s total U.S. sales for the first six months were down by 1.8%, sales of their popular F-series pickups were up by 4.9% y-o-y and SUV sales have remained relatively flat. Thus, proportionately higher volume sales of the company’s more expensive and higher margin SUVs and pickups are expected to aid its top line growth in the second quarter.

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Ford’s bottom line, however, is expected to remain under pressure as rising commodity costs, warranties, and exchange impacts would continue to weigh on its total margins. Our key expectations from the company’s 2018 performance are highlighted in our interactive dashboard analysis. You can make changes to our assumptions to arrive at your own fair price estimate for the company.

 

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