Ford Q2 2013 Earnings Preview: Watch For Special Charges Related To Europe Restructuring, Asia Expansion; North American F-Series, Fusion Q2 Sales Soar

[UPDATE, July 24, 9 a.m. EDT] Ford Motor Company (NYSE:F) reported Wednesday morning $1.23 billion in net income, or 45 cents per share, on robust sales of its Focus and Fusion sedans and F-series pickup truck, narrowing losses in Europe and significant gains in Asia. Ford exceeded the Thomson-Reuters EPS estimate of 37 cents per share on net income of $1.48 billion.

The company lowered its expected losses in Europe from $2 billion to $1.8 billion and said it would turn a profit in Asia this year and earn more overall in 2013 than last year.

The company’s share priced gained 3.25 percent to $16.94 in pre-market trading on Wednesday in New York.

Original story begins here:

Ford Motor Company (NYSE:F) is expected to post a 22 percent rise in profit for its second quarter thanks to robust North American car and truck sales, despite continuing troubles in Europe and an aggressive Asian expansion, especially in China.

The Dearborn, Mich.-based automaker will release its second-quarter earnings statement on Wednesday before U.S. stock markets open. Analysts polled by Thompson Reuters expect Ford to report net income for the three months ended June 13 of $1.48 billion, or 37 cents per share, compared to $1.2 billion, or 30 cents a share, in the same quarter last year.

Revenue is expected to increase to $35.2 billion from $31.3 billion in the year-earlier quarter. The stock price has gained $3.05, or 22.25 percent, to $16.76 since Ford paid a 10-cent-per-share dividend on May 1.

So what should you look for in Ford’s second-quarter earnings?

“We’ll see North American sales carrying the day,” said Michelle Krebs, senior analyst for automotive intelligence provider Edmunds.com. “Everyone will be looking at Europe -- they’ll be losing, but did they lose less or more compared to last year? There are so many special charges for Europe right now as both Ford and GM restructure. You don’t know which quarter they put those charges into their earnings.”

Ford is in the process of shutting three plants in Europe, which is expected to be completed by the end of 2014, and it has been significantly reducing inventories.

Earlier this month Stephen Odell, head of Ford’s European operations, said the company is still on track to break even in Europe by 2015. In June the company reported European sales growth of 6.4 percent compared to an overall decline of 6.5 percent in a market that hit a 20-year-low last month. Ford’s European market share stands at 8.2 percent, up one percentage point from the previous year.

“While we believe Ford’s longer term profit outlook in Europe is far superior to GM’s, we expect losses in the region to persist next year,” said Patrick Archambault, auto analysts for Goldman Sachs, in a research note this week.

In the United States, Ford’s overall sales and truck sales volumes increased in the second quarter from a strong performance in the previous three months. Overall year-over-year volume in the April-to-June period jumped 15 percent, following an 11 percent rise in the first quarter. The F-Series pickup, America’s top-selling vehicle, saw a 27 percent rise in the second quarter.

“That says a lot right there,” said Alec Guiterrez, senior market analyst for automotive valuation company Kelley Blue Book. “And they’re doing well in segments that have been traditionally dominated by the Japanese. Sales volume for the Fusion sedan was up 10.5 percent year-over-year in the second quarter even though at this time last year Ford was spending heavily on incentives to move the previous-generation Fusion.”

Ford is also spending heavily to play catch-up in China, where GM and Volkswagen are the top foreign players. Last month Ford opened a new $500-million plant in Chongqing with its partner, Changan Ford Automobile Ltd., which will manufacture 1-liter and 1.5-liter engines for passenger cars. It also disclosed plans for another plant with partner Jiangling Motors Co., where workers will build sports utility and commercial vehicles.

Ford has been shoveling money at expanding in India and China, where the company seeks to more than double the share of its global sales from its current 15 percent to 40 percent by 2020. The company saw sales shoot up almost 50 percent in China in the first five months of the year. It’s in the process of spending nearly $5 billion to build seven plants in Asia: five in China and two in India as part of its plans to roll out 15 new models in the region over the next two years.

With Ford’s write-downs on European restructuring and its aggressive investments in Asia, investors will be looking to see how the company will factor these charges into its second-quarter earnings. For the time being, North American sales are vital to the company’s profitability as it positions itself for better global performance.