Ford's (F) Q2 Will See Pressure from F150 Changeover Costs, but Long-Term Outlook Still Strong - Stifel

Stifel is out with a Q2 earnings preview for Ford Motor (NYE: F). The company is expected to report results on Thursday morning, ahead of the bell.

James Albertine said the firm recently lowered its EPS estimate by 2 cents to $0.38, which is in-line with consensus estimates. The analyst cited: (a) a higher tax rate than previously modeled (per recent Ford guidance) and (b) slightly higher operating expenses related to the ongoing Ford F-150 changeover.

Albertine noted, As Ford sales have seemed to lag peers in the U.S. during 2Q14, we would expect a more muted profit outlook for the back half. Market wide weakness in South America has likely remained a headwind as well in 2Q14, similar to recent quarters. Globally, we would look to Europe as a source of upside relative to our reduced estimates as the market remains relatively steady, and as Ford has demonstrated its strong defense of already formidable market share across key markets.

Quarterly sales performance: Ford total sales rose +2.1% y/y in June, fell -0.8% y/y in May, and fell -4.6% y/y in April, adjusted for days, blending to total 2Q14 sales fall -1.2% y/y (vs. -2.8%, +7.0%, and +9.7% y/y the prior three quarters, respectively. We note that Ford retail sales fell -0.5% y/y in 2Q14 (vs. -1.7%, +6.8%, and +14.5% y/y in the prior three quarters, respectively). In recent months, Ford has noted strong demand from the West Coast, particularly with respect to the small/compact car segment.

Looking ahead, Albertine comments, While we believe that 2Q14 results will see some increased operating expenses due to the pending F-150 changeover, we are raising our long-term outlook somewhat to reflect (a) the projected success of Ford's broader product refresh cycle (similar to 2010/11 period successes), and (b) Ford's potential multi-year advantage vs. light-duty truck competitors as it relates to the production system overhaul due to the increased use of aluminum. Lastly, though more difficult to glean in real-time, we believe Ford results will demonstrate more financial consistency relative to its OEM peers in the face of persistent global macroeconomic uncertainty through the remainder of the decade; a testament, we think, to the head start Ford has as it relates to broad sweeping culture modifications put in place at the outset of its turnaround effort.

Stifel has Ford with a Hold rating.

For an analyst ratings summary and ratings history on Ford click here. For more ratings news on Ford click here.

Ford closed at $17.82 yesterday.

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