Ford (F) Motor Company’s Q1 2013 Earnings Preview: Profits Down 3.2 Percent As Woes In Europe, South America Weigh On China, U.S. Growth

Ford Motor Company (NYSE:F) is expected to post a 3.4 percent decrease in profit for the first three months of 2013 as declining sales in Europe and Latin America offset increases in the U.S. and China.

The Dearborn, Mich.-based automaker will release its first-quarter earnings statement Wednesday before U.S. stock markets open. On average, analysts polled by Thomson Reuters expect Ford to report net income of $1.54 billion, or 38 cents per share, compared to $1.59 billion, or 39 cents per share, in the year-earlier quarter.

Revenue is expected to climb to $33.78 billion from $30.53 billion.

Analysts have cooled on Ford’s prospects, having cut their EPS estimates by 4 cents over the past quarter due to concerns about emerging market performance and the company’s European woes.

Revenue weakened in Europe, Latin America and India. In Europe, car sales dropped steeply in the first quarter, particularly in Germany. In response to the ongoing decline in car demand on the continent, Ford closed a factory in Belgium and two plants in the U.K. Goldman Sachs estimates the company will lose $499 million in the first quarter.

In South America the company expects to lose $300 million in the first quarter in the region thanks to unfavorable changes in currency exchange rates -- especially in Venezuela, where the bolivar was devalued by a nearly a third in February -- inflation and an influx of stiffer competition from the likes of Kia, Hyundai and Honda, as well as new players such as China’s Chery and Geely and India’s Tata and Mahindra. Goldman Sachs, meanwhile, estimates the company will lose $269 million in South America in the first quarter.

Sales in India have also weakened. David Schoch, president of Ford's Asia-Pacific operations, told CNBC from the Shanghai Auto Show that softness in the slowing Indian market is “a little bit of a concern.” Ford’s sales in the world’s second-largest economy were down 38 percent in March.

Fortunately for the automaker, Americans and Chinese drivers continue to feed a recovery in the sector.

The company is seeing both accelerating sales in the United States and widening profit margins, thanks in part to the One Ford program, which includes selling more of the same models worldwide rather than region-specific versions. U.S. pickup truck sales are booming right along with a rebounding housing market. Sales of the Ford F-Series pickup truck, America’s No. 1-selling vehicle, jumped 17 percent in the first quarter while U.S. sales of its newly designed Escape SUV and Fusion sedan rose 25 percent in the first three months of the year. U.S. consumers paid on average $1,000 more for Ford cars, up to $32,784, according to TrueCar.com.

Ford’s market share in the U.S. jumped to 16.2 percent in the first quarter, from 15 percent in the same quarter last year.

In China, Ford has seen sales growth of 54 percent in the first quarter on robust demand for the Fusion, and EcoSport and Kuga SUVs. While it currently holds only about a 3 percent share of the lucrative Chinese market, it is investing heavily there and plans to grab a piece of the luxury market by bringing Lincoln to China in 2014.

As part of its investments in Asia, Ford last week announced it increased its stake in Jiangling Motors Corporation Ltd. (SHE:000550) to 31.5 percent. JMC, a Nanchang-based manufacturer of trucks and buses, has been a Ford partner since 1997. Ford’s stake in the company is about $700 million.

Ford announced in January a dividend of 10 cents per share paid on March 1, and a second dividend on April 12. This is twice the level of the 5-cent dividends paid in 2012, and it's part of the "One Ford" restructuring plan to deliver profits to shareholders. Ford announced the higher dividend a year earlier than many analysts had expected.

Analysts will look past Wednesday’s sales numbers and see signs that the automaker is improving not just unit numbers but profit on those sales. With a target date of profitability in Europe still two years away, Ford’s performance this year will depend largely on whether American and Asian buyers continue to boost sales as it works through its challenges in Europe and South America.