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Will Declining Sales in China Impact Ford's (F) Q4 Earnings?

Zacks Equity Research
·4 mins read

Ford F set to release fourth-quarter 2019 results on Feb 4, after the closing bell. Lackluster performance of the company’s China segment is expected to have adversely impacted its quarterly earnings.

(Also read: Will Ford (F) Disappoint Investors This Earnings Season?)

Q3 Highlights for Ford’s China Market

In third-quarter 2019, wholesale unit volumes in the China segment totaled 77,443, marking a decline of 37.7% year over year. However, the automaker’s total retail sales reached 28,119 units, reflecting steady growth through this period.

Sales of the new Ford Territory SUV were 11,572 units in the quarter, making it the best-selling Ford SUV in the China market as of September 2019. Sales of the pickup family (Ranger and F-150 Raptor) came in at 1,396 units, up 24% year over year.

Softer Sales Expected to Have Hurt China Market in Q4

Slowdown in economy and discontinuation of Sedan models is expected to have hurt vehicle sales and dampened margins in Ford’s China, South Africa and the Middle East and Africa segments. In the fourth quarter, the company delivered 146,473 vehicles in China, down 14.7% year over year.

Ford China’s National Distribution & Services Division (NDSD) and Jiangling Motors Co., Ltd. (JMC) delivered 62,137 and 63,064 vehicles in the quarter, down 24% and 5.3%, respectively, year on year. Lincoln sold 12,937 vehicles during the period in discussion, indicating a year-over-year 17.6% decline. Ford China Imported Vehicles delivered 2,394 vehicles in fourth-quarter 2019, down 36.8% year over year, while Ford Lio Ho Motor Co., Ltd. (FLH) sold 5,941 vehicles, marking 50% year-over-year growth.

Further, Ford brand delivered 83,336 vehicles in China in the December-end quarter, down 18.8% year over year. Ford-branded SUVs sold 26,539 units in the fourth quarter, representing a 14.8% drop, year over year. However, sales of Ford F-150 and Ford transit were up 46.6% and 10.6%, respectively, year over year, during the same time frame.

The Zacks Consensus Estimate for fourth-quarter automotive revenues in the Asia-Pacific and Africa segment is pegged at $1,891 million, suggesting a 47.47% plunge from the year-ago sales of $3,600 million. We believe the Asia-Pacific and Africa segment’s dismal top line is likely to have hurt this Zacks Rank #4 (Sell) company’s quarterly bottom line, partly offset by solid revenues from the Middle East and Africa markets.

Ford’s Overall Earnings & Revenue Projections for Q4

The Zacks Consensus Estimate for Ford, which comes just after General Motors GM, stands at earnings of 17 cents. This suggests a 43.33% slump from the prior-year profit. Also, the Zacks Consensus Estimate for sales of $36.79 billion indicates a 4.98% decrease on a year-over-year basis.

Stocks to Consider

Here are some companies, which according to our model have the right combination of elements to post an earnings beat in the to-be-reported quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

LKQ Corporation LKQ is scheduled to report fourth-quarter figures on Feb 20. The stock has an Earnings ESP of +1.49% and carries a Zacks Rank #3, currently.

Visteon Corporation VC is set to release quarterly earnings on Feb 20. The company has an Earnings ESP of +2.63% and carries a Zacks Rank of 3, at present.

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