Ford Earnings Is Tale of Two Companies
Despite posting better than expected earnings for the fourth quarter, Ford finds its stock under pressure due to the company guiding Wall Street to expect greater losses in Europe. It is the latest sign that Ford continues to be a tale of two companies: In North America it is growing profits and margins while Europe is a money losing operation.
The initial reaction among investors is one of disappointment. Ford shares dropped by 4% shortly after the opening bell.
What is Ford's stock doing now? (Click here for the latest before-hours quotes.)
Ford Q4 Earnings
- Profit: $1.681 billion
- EPS: $0.31/share
- Revenue: $36.5 billion
- Automotive Revenue: $34.5 billion
North American Profits Rev Higher
The combination of stronger pricing, greater sales volume and the elimination of UAW contract ratification costs helped Ford boost profits in North America by nearly a billion dollars. In the fourth quarter, Ford made $1.872 billion compared to $889 million a year ago. After restructuring its U.S. operations in 2009 and 2010 by closing plants and cutting costs, Ford is now reaping the benefits. Even more important is the rebound in U.S. auto sales. The increase in North American auto sales helped Ford boost sales by 100,000 vehicles.
"We expect North American profits to continue to be strong this year," said CFO Bob Shanks. "We also expect to grow our market share." Ford ended 2012 with 15.5% market share in the U.S., the second highest share in the market.
(Read More: Auto industry posts best U.S. sales year since 2007)
Europe Losses Mounting:
Ford delivered a mild surprise to analysts by forecasting a greater than expected loss in Europe. The company says it now expects to lose $2 billion in 2013 in Europe. That is an increase from the company's previous guidance of losses totaling $1.75 billion. Why the greater losses? Ford says it's because the European auto market as a whole continues to slide. The lower volume combined with a stronger Euro means Ford will incur greater losses, even as it moves toward closing plants and cutting costs in Europe.
Ford is standing by its turnaround plan to be break-even in Europe by 2015. "This year will be the trough in losses in Europe," said Shanks.
Despite Fords optimism that its European operation is on track to ultimately get back in the black, the greater than expected losses this year are a disappointment for auto analysts. For that reason, many expect Ford shares to be under pressure in the near future.
(Read More: Ford doubles dividend to highest in 7 years)
—By CNBC's Phil LeBeau; Follow him on Twitter @LeBeauCarNews
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