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Will Ford's (F) Best-Seller F-Series Drive Q3 Earnings?

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Will Ford's (F) Best-Seller F-Series Drive Q3 Earnings?

F-Series, one of the best-sellers in Ford's (F) truck segment, might drive its third-quarter earnings. However, recalls and rise in costs create headwinds.

Ford Motor Company F is scheduled to announce third-quarter 2018 results on Oct 24, before the market opens. In the last reported quarter, its bottom line missed the Zacks Consensus Estimate while automotive revenues marginally surpassed.

In the past three months, shares of Ford have outperformed the industry it belongs to. During the period, the stock has lost 18.8% in comparison with the industry’s decline of 15.7%.

Over the past two quarters of 2018, the company’s sales were majorly driven by sports utility vehicles (SUVs) and trucks. Out of its diverse product line across different segments, the key players include F-series trucks and Lincoln Navigator, among others.

Ford Motor Company Price and EPS Surprise

Ford Motor Company Price and EPS Surprise | Ford Motor Company Quote

On the contrary, Ford’s traditional sedans witnessed a downward trend in the same time frame. Declining consumer demand and product profitability impelled Ford not to invest in North America’s next-gen sedans.

Strong demand for high-end trucks aided Ford’s F-Series to gain one of the top spots among best-selling pickup trucks in America. Further, year-over-year growth in F-Series’ demand encouraged the company to set a target of selling 1 million F-Series pickups by the end of 2018. In the first half of 2018, Ford sold more than 450,000 F-Series trucks, referring that it is on track to achieve its target. Moreover, the fact that the company usually sells almost 52% of its pickups in the second half of the year indicates that it has the ability to cross the set mark for 2018.

Taking a glance at the company’s sales in the last three months, unit sales of F-Series seem to be a striking one. Ford’s F-Series crossed the 70,000 truck sales mark for the seventh consecutive month in September.

Although the number of F-Series trucks sold are high but the brand reported a sales decline of 8.8% in September. A major portion of Ford’s trucks segment comprises of the F-Series, which witnessed 9.9% fall to 93,408 units during the month. With most of the company’s sales depending on its pickup line, a monthly sales decline recorded by this segment is a concern for Ford.

Additionally, imposing tariffs on steel and aluminum imported from China is expected to hurt Ford like other automakers. In fact, Ford claimed that the increased tariffs will cost it almost $1 billion. Apart from raw material costs, Ford also spent money on recent recalls. In the last month, Ford announced a recall of 2 million F-150 pickup trucks in North America due to faulty seat belt. Estimated cost of the recall was $140 million, which will hurt its third-quarter earnings, per management.

Earnings Schedules of Other Major Auto Companies

Among other automotive companies, O’Reilly Automotive, Inc. ORLY is scheduled to release results on Oct 24, whereas BorgWarner Inc. BWA and General Motors Company GM are scheduled to report earnings on Oct 25 and Oct 31, respectively.

O’Reilly sports a Zacks Rank #1 (Strong Buy), while BorgWarner and General Motors carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for O’Reilly, BorgWarner and General Motors are 15.7%, 6.7% and 8.2%, respectively.

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General Motors Company (GM) : Free Stock Analysis Report
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