Ford’s Earnings Highlight Positive Trends

Ford Motor Co. (NYSE:F) posted solid results as Q1 earnings of $2.6 billion on April 26th jumped 22% year over year. The auto giant competes globally with automakers like BMW (GR:BMW), GM (NYSE:GM), Honda (NYSE:HMC), Toyota (NYSE:TM), Daimler (ETR:DAI) and others. Here we highlight a few key trends that emerged from the quarterly results. Our price estimate for Ford stands at $16.65, which is around 30% above the current market price.

Global Automotive Industry and Ford Continues Solid Growth

Global automotive industry continued its strong recovery from its depths of 2009. Ford’s One Ford plan, which focuses on restructuring to achieve better operating profitability, developing new products and improving balance sheet, helped increase vehicle sales. Despite Ford’s commendable performance, auto sales grew at a faster pace than Ford’s leading to a slight reduction in Ford’s market share.

U.S. Car Sales Growing Faster than Trucks

US customers continue to increasingly prefer cars over trucks due to rising oil prices and better environmental awareness. Contribution of cars to Ford’s total vehicle sales increased from 33.6% in 2010 to 35% in 2011 Q1. This displays customer confidence in Ford’s fuel efficient product such as Fiesta, Fusion, Edge, Escape, etc. that continued to fuel demand. Though, because trucks are more profitable than cars, this may adversely affect Ford’s automotive business profit margins.

Commodity and Structural Costs

While Ford’s net income grew because of increasing volume of sales and favorable vehicle pricing, higher structural and commodity costs continue to exert negative pressure on Ford’s operating profits. We believe that rising commodity costs will hurt Ford’s profit margins in near to midterm.

You can make your own price estimate for Ford, by dragging the trend lines in the interactive charts above.

You can see the complete $16.65 Trefis price estimate for Ford’s stock here.