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Ford earnings & analysis

Published on July 25, 2013, 08:58 GMT

Ford (NYSE:F) shares have performed exceptionally well this year with returns well over the gains seen within the broader markets. Share have moved to the upside by over 30% year to date on the back of strong sales outside of its European business segment. The company reported strong second quarter earnings on Wednesday morning before the market open. Analysts were expecting an adjusted earnings per share of $0.37 whereas the company reported $0.45 in EPS excluding a number of one time items.

Revenue was up 14% to $38.1 billion, beating analysts’ forecasts of $34.9 billion in large part to strong sales out of the U.S. and China. The company earned $2.3 billion in profits in its North America business segment as a result of strong trucks sales. U.S. pickup truck sales have jumped 22% in the first six months of this year, roughly three times the rate of the rest of the industry. This data is largely in line with the recent consumer confidence data of late, the demand for new vehicles specifically trucks, has risen along with the housing recovery. Up until this point, contractions and construction companies haven’t had the demand in place to refresh their aging fleets, thus as demand continues to rise within the housing sector I would expect truck sales will continue to strengthen.

Ford reported its best ever profit of $177 million in Asia. Sales jumped 47% in China during the first six months of this year, or more than four times faster than total industry sales growth of 17%. The record setting performance was fueled by a well received lineup within China’s dealerships. The company introduced popular new vehicles like the EcoSport and Kuga SUVs which fit well with consumer lifestyles. Going forward, China will be an increasingly important business segment for the company. Rising incomes, combined with decent GDP growth bodes well for long term sales. By establishing itself today with lower priced vehicles Ford stands in a good position to convert these customers up into the higher end offerings down the road.

As nearly all analysts and retail investors alike predicted, Europe again weighed on profits. In Europe, Ford narrowed its expected full-year loss to $1.8 billion from $2 billion. The company lost $348 million in Europe during the second quarter, somewhat better than the showing last year. While this business segment will most likely remain weak for the next few years, I would be watching the 12.2% unemployment rate within Europe for future guidance within the region. All in all the quarter was good, shares traded higher by almost 4% early in the session to reflect the better than anticipated results.

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    • More importantly, it's a sign consumer confidence is improving. As the labor market data continues to pour in, I think we'll see a gradual improvement to US employment, including less layoffs. I'd monitor the jobless claims data just as closely as data on job creation.

    • Not unsurprising when you consider the surge in personal debt. People usually take on credit for big ticket items, cars being among the biggest.

    • it's impressive to see how far the automotive industry has come in just 4 years. there are talks of higher production in north American plants. this is a good sign for a continent gradually losing its manufacturing power.

    • We've witnessed a surge in auto sales in the United States this year. Ford's F-Series sold more than 70,000 units in May. All in all, the Big 3 automakers have rebounded very well.


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