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Ford Motor Company Earnings: What to Watch For

John Rosevear, The Motley Fool

Ford Motor Company (NYSE: F) will report its second-quarter earnings results after the U.S. markets close on Wednesday, July 24. Here's a look at what to watch for when the Blue Oval reports.

What are Wall Street's expectations?

Wall Street analysts polled by Thomson Reuters expect Ford to report adjusted earnings of $0.31 per share, on average, up from $0.27 per share in the second quarter of 2018. They also expect Ford's automotive-segment revenue to drop to $35.17 billion, on average, from $35.91 billion in the year-ago quarter.

A blue 2020 Ford Explorer shown parked next to a lake

How did Ford's sales fare in the second quarter of 2019?

Ford does business in over 100 countries, but three regions account for the vast majority of its sales and profits: the United States; China; and the 20 countries that make up western and central Europe, or what Ford calls the Euro 20.

U.S.: Truck sales were strong while dealers awaited new SUVs

Ford's U.S. sales fell 4.1% in the second quarter of 2019. Ford's pickup sales, a key barometer of its financial health, remained strong in the quarter, and pricing was roughly flat from (good) year-over-year levels. But Ford's overall sales total was hurt by its decision to discontinue the compact Focus and by tight supplies of the Explorer SUV. Ford was in the midst of transitioning to an all-new Explorer during the period.

The first all-new Explorers began arriving at dealers just before the quarter ended. An all-new version of the compact Escape is set to follow later this year.

The upshot: Revenue may be down, and the Explorer's launch costs will weigh on profits -- but margins should still be decent.

China: Are things finally starting to turn around?

Ford's sales in China fell 21.7% in the second quarter of 2019 from a year ago. Ford's sales in China have been in free-fall for several quarters, but there are signs of progress. Sales of an all-new version of the Focus are rising, the Lincoln luxury brand has been doing well, and inventories at Ford's Chinese dealers have been greatly reduced from the bloated levels we saw in the year-ago period.

The upshot: Ford is making progress on a major overhaul of its China operation, but profits in the second quarter may have been very thin (or nonexistent).

Europe: Sales fell, but margins may have risen

Ford's sales in the Euro 20 fell 3.4% in the second quarter of 2019. But again, the story is more nuanced than the headline numbers suggest. Sales of Ford's small Fiesta fell sharply from the year-ago period, when it was all-new and interest was high -- but sales of the one-size-up Focus and the (very profitable) Transit family of commercial vans rose year over year.

The upshot: Fiestas are less profitable than Transits. A drop in Fiesta sales combined with an increase in Transit sales was likely a win for Ford's profit margin in the region -- but again, restructuring and new-model-launch costs may have weighed on the bottom-line result.

An orange Ford Transit Custom parked on a city street

What to expect when Ford reports earnings

Ford CFO Bob Shanks said in April that while Ford expects its full-year adjusted operating profit to be better in 2019 than it was in 2018, restructuring costs and spending related to new-product launches would likely weigh on its results as the year unfolded.

That may turn out to be the story of the second quarter. Ford's revenue is likely to be down, and one-time charges related to restructuring in Europe and China may be significant. But improvements in product "mix" in the U.S. and Europe might have helped to offset some of those costs and kept Ford's margin in decent shape.

We'll find out on Wednesday afternoon.


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John Rosevear owns shares of Ford. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.