Will Ford (F) Miss Q3 Earnings on Weak Production Volumes?
Ford Motor Co. (F) is set to report its third-quarter 2014 results on Oct 24. In the last quarter, the company had posted a positive earnings surprise of 8.1%. Further, the automaker managed to beat earnings in the last four quarters with a positive average surprise of 3.8%. Let us see how things are shaping up for this announcement.
Factors Affecting the Quarter
Ford is taking many initiatives to boost sales and earnings, such as rapid global expansion and product launches. The company is also turning toward capital deployment to boost shareholder value. In the first quarter of 2014, the automaker increased its quarterly dividend by 25% to 12.5 cents per share. In May 2014, the company’s board approved a new repurchase program for 116 million shares. These share repurchases will offset the impact of share dilution and help improve shareholder returns.
However, Ford expects production volumes of 1.54 million units in the third quarter of 2014, down 12,000 units from a year ago. Last month, the automaker also reduced the guidance for 2014 pre-tax profit, excluding special items, to $6 billion from the previous guidance of $7–$8 billion. The decline in guidance is due to an increase in warranty costs, including recalls in North America, along with a decline in industry volumes and weak economic situation in South America and Russia.
Earnings Whispers?
Our proven model does not conclusively show that Ford is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Zacks ESP: Ford has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 19 cents per share.
Zacks Rank: Ford currently has a Zacks Rank #5 (Strong Sell). We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Here are some companies in the automobile sector you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
American Axle & Manufacturing Holdings Inc. (AXL) has an Earnings ESP of +4.6% and a Zacks Rank #3 (Hold). The company will report its third-quarter 2014 results on Oct 31.
Meritor, Inc. (MTOR) has an Earnings ESP of +37.5% and a Zacks Rank #3. It will release its third-quarter earnings results on Nov 12.
Tenneco Inc. (TEN) has an Earnings ESP of +1.9% and a Zacks Rank #3. The company will post its third-quarter earnings results on Oct 27.
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Read the Full Research Report on AXL
Read the Full Research Report on TEN
Read the Full Research Report on MTOR
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