Thursday, 28 January 2010 at 09:58, Reuters, Detroit
Ford Motor Co is poised to post a fourth-quarter profit on Thursday and could swing to a full-year profit, reflecting market share gains amid gradually recovering US auto sales.
The results are expected to show continued progress in the turnaround efforts at Ford, the only large U.S. automaker not to reorganize under a US government-supported bankruptcy in 2009.
Still, investors are expected to look beyond the results for indications of how Ford will address a heavy debt load that has left it at a disadvantage to rivals General Motors Co and Chrysler, but financed its turnaround.
In other aspects, analysts see Ford as steps ahead of GM and Chrysler in its turnaround plans and expect it to continue to take US market share from its rivals.
"I think likely it will be a good number based on what we saw in the third quarter, and based on where Ford has been in terms of its sales and more importantly in terms of its production output," Autoconomy analyst Erich Merkle said.
Merkle said investors will look for signs of sustainability in the turnaround plan, positive cash flow and for any aspects to Ford's plans to reduce its debt load.
Analysts on average expect Ford to post a profit of 26 cents per share excluding one-time items, according to Thomson Reuters I/B/E/S.
Some of the more accurate analysts, as measured by Thomson Reuters StarMine, are expecting Ford to report a profit 3.4 per cent above the consensus.
Ford's results come as rival Toyota Motor Corp is mired in a crisis over faulty accelerator pedals that have led to a massive recall of top-selling vehicles and the suspension of production and sales temporarily.
Ford shares, and its market cap, have reflected a surge in investor expectations. The stock has jumped nearly six-fold in a year from under $2 to $11.55 on Wednesday on the New York Stock Exchange, and its market cap is more than $37bn.
"Hopefully, operationally you see that gradual improvement over the year, especially given how well they performed relative to the other domestic (automakers)," said Mirko Mikelic, senior portfolio manager at Fifth Third Bank.
Ford Chief Executive Alan Mulally has said the No 2 US automaker will be solidly profitable in 2011. The automaker is expected to update that forecast with more detail on Thursday.
Analysts see Ford turning a profit in 2010. The last time Ford had a full-year profit on a net basis was in 2005.
Ford posted a $1bn profit that surprised Wall Street analysts in the third quarter. It also reported $1.3bn of positive quarterly cash flow in its auto operations, its first positive quarterly cash flow since the second quarter of 2007.
After posting a record $14.67bn net loss in 2008- and losses totaling $30bn from 2006 through 2008- Ford reported net income of $1.8bn in 2009 through September.
The net profits through the first three quarters of 2009 included gains from debt reduction efforts and other items that added $3.2bn to Ford's results. It is unclear what kind of writedowns or gains might surface from the fourth quarter.
With Ford's product development plans on track, the main uncertainties surround whether the US economy and auto sales will show a gradual recovery and how quickly Ford can address the heavy debt load it is now carrying, analysts say.
The automaker borrowed more than $23bn in late 2006 to finance its restructuring plans in what Mulally often refers to as Ford's "home improvement loan."
Total automotive debt for Ford stood at $26.9bn at the end of September, when it had cash and marketable securities in its automotive operations of $23.8bn.
Ford's turnaround plan includes a commitment to cars in North America, where it plans to begin building a Fiesta small car and global Focus compact this year. Ford also plans to build a new version of its Explorer SUV.
Ford's US sales fell 15.4 per cent in 2009, less than the US auto industry drop of 21 per cent to 10.4 million vehicles, the worst result in 27 years. Ford gained 1 percentage point of US market share to 15.5 per cent.
"If there is any kind of recovery they should be profitable in 2010," Merkle said. "I think Ford is looking to underpromise and over-deliver," Merkle said.
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