Ford (F) on Tuesday reported its 14th consecutive profitable quarter, with net income of $1.63 billion, or $0.41 a share. That solidly beat analyst estimates, which averaged about $0.30 a share according to a Bloomberg survey.
It's about equal to the $1.65 billion Ford reported a year ago. But the story behind the numbers is very different.
A Great Story for Ford at Home
While last year's profit was powered by decent results from around the world -- and a relatively favorable tax situation -- this year's different. Ford had outstanding results in North America in the third quarter. But those results were offset somewhat by ongoing struggles in Europe.
In North America, Ford posted a pre-tax operating profit of $2.3 billion, up sharply from the $1.6 billion that it earned a year ago. That comes despite a loss in U.S. market share, as Ford's improved pricing power increased its margins significantly.
The story in the U.S. is pretty simple: Many of Ford's production lines are maxed out, due to the popularity of strong new products such as the Focus and Explorer.
Because the economy has been only so-so, Ford has been reluctant to make the big investments needed to add assembly lines. Meanwhile, it can get great prices for its products -- with fewer discounts -- because demand is strong and the hot models are in short supply. That has boosted its per-car profits in its home market.
Troubles Overseas Mean Losses for a While Longer
Ford is investing for growth in Asia and South America, and those investments will cut into profits for a while. But the story in Europe is grim. Ford lost $468 million in Europe in the third quarter, and expects to lose over $1.5 billion overall in 2012.
That's a problem, but it's not just Ford's problem. Nearly all of the automakers that do business in Europe, including General Motors (GM) and Volkswagen (VLKAY), are struggling. The cause is a deep recession that has driven new-car sales to a near-20-year low, with no recovery in sight.
Last week, Ford announced a comprehensive plan to bring its European operation back to profitability. It's a good plan, but it'll take a couple of years to bear fruit. Meanwhile, losses are likely to continue -- but given Ford's strength at home, those losses shouldn't be too much of a problem for the Blue Oval.
At the time of publication, Motley Fool contributor John Rosevear (@jrosevear) owned shares of Ford and General Motors. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of General Motors and Ford.
Introduction to Preferred Shares
Learn the difference between preferred and common shares.View Course »