Ford is set to report earnings before the bell on Tuesday. What should we expect?

If analysts polled by Bloomberg are on target, we should expect a decent quarter. While revenues are expected to slip a bit versus year-ago totals, operating profit is expected to come in at about 26 cents a share, up from 20 cents in the fourth quarter of 2011.

The market has been increasingly optimistic about Ford's prospects, with shares near their highest levels in almost two years. What should we expect when the Blue Oval reports tomorrow?


Hints of a good quarter
Earlier in January, I noted that Ford had dropped some hints that suggested that its fourth-quarter results would be pretty good. Among the clues:

  • A big raise for shareholders. Ford's board of directors recently voted to double the company's dividend from 5 cents a share to 10, starting in the first quarter of 2013. The board credited the company's "strong balance sheet, increased liquidity and positive business performance" - all good signs.
  • Comments from executives. Several of Ford's senior leaders dropped positive remarks at the North American International Auto Show earlier this month. Among them, CFO Bob Shanks, who described the company's financial performance over the last nine months of 2012 as "wonderful."
  • Big sales at home. The biggest sign of strength for Ford right now may be its strong sales in the U.S. - particularly sales of the company's full-sized pickup trucks. Pickups can carry huge margins, and the competitive strength of Ford's F-Series lineup has meant that the company has been able to limit discounts - a move that could fatten the Blue Oval's bottom line.

That all suggests that Ford's fourth-quarter results will look pretty strong. But the company still faces challenges that will weigh on earnings - though even there, things are looking up.

A strong response to a big challenge
Europe, of course, is proving challenging for nearly every automaker doing business there. While rival General Motors' plans to overhaul its money-torching German subsidiary seem stuck in neutral, there are some signs that Ford's efforts to right its European ship are moving forward.

GM's Europe efforts have been weighed down by internal strife, an ongoing struggle with a powerful German labor union, and an increasing sense that management lacks a clear long-term vision for the long-troubled unit. But the story is different at Ford, where a clear-cut plan to respond to mounting losses is under way - and investor confidence in its eventual success is high.

Ford's plan includes three factory closings and a slew of new-to-the-region models - most drawn from Ford's global portfolio of fresh, strongly competitive products. Among those products: a small SUV called the EcoSport, based on the Fiesta subcompact and originally designed for emerging markets; the well-regarded Edge SUV; and the next-generation version of the iconic Mustang.

While Ford's plan is a solid one, it'll be several more quarters before its impact is felt on the company's bottom line. When Ford reports tomorrow, its loss in Europe for the fourth quarter is likely to be in the neighborhood of the $468 million it lost last quarter. Ford has said that its full-year losses in Europe could exceed $1.5 billion for 2012, and management expects 2013 to be "similar."

Beyond the numbers, reason for confidence
Even as losses continue in Europe, Ford's plan - and its notable success with a not-very-different plan here in the U.S. over the last several years - has already given investors confidence. Ford shares are up over 30% since the company's Europe plan was announced, and have recently traded near levels not seen since May of 2011, before the extent of the crisis in Europe became clear.

That bodes well for Ford's prospects. While Tuesday's numbers may represent an incremental jump from year-ago profits, it's the guidance for the coming year that will be of significant interest to many investors. The signs right now look promising, but the devil will be in the details, and I'll have a full look at those details for you on Tuesday afternoon.

Ford has been performing incredibly well as a company over the past few years -- it's making good vehicles, is consistently profitable, recently reinstated its dividend, and has done a remarkable job paying down its debt. But Ford's stock seems stuck in neutral. Does this create an incredible buying opportunity, or are there hidden risks with the stock that investors need to know about? To answer that, one of our top equity analysts has compiled a premium research report with in-depth analysis on whether Ford is a buy right now, and why. Simply click here to get instant access to this premium report.

The article Ford's Fourth-Quarter Earnings: A Preview originally appeared on Fool.com.

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