Ford (NYSE: F) released Q1 2011 financial results this before the market open. Net income for the first quarter came in at $0.61 per share, significantly above the consensus estimate of $0.50 and topping the highest estimate of $0.60 per share. Ford continues to push the trend this earnings season of positive earnings surprises to the high side.
Revenue for the quarter was $33.1 billion, an 18 percent improvement over the $28.1 billion figure in the first quarter of 2010. The quarter's sales figure also significantly exceeded the consensus estimate of $30.64 billion.
The pre-tax operating profits of $2.8 billion were spread across all operating units of the company. Here is the breakdown of where the profits came from:
· North America auto sales operating profits: $1.8 billion.
· Ford Credit operating profits: $713 million.
· European auto sales operating profits: $293 million.
· South America auto sales operating profits: $210 million.
· Asia Pacific Africa operating profits: $33 million.
All areas listed posted higher profits than a year earlier except Ford Credit. The credit division saw profits decline by $115 million. These results from the finance arm had been forecast in previous guidance.
One interesting point made in the earnings release is the strengthening of Ford's balance sheet in the first quarter. Gross cash increased by $800 million to $21.3 billion and debt was reduced by $2.5 billion in the quarter. The result was a $3.3 billion increase in the net automotive cash level to $4.7 billion. Ford's debt credit rating was boosted by Moody's last month to B2, still well into junk bond territory. It will be interesting to see if the credit agencies take another look at increasing the rating by a notch or two.
The full year earnings estimate for Ford was $1.81 per share, now up to $1.91 because of 10 cent surprise in the first quarter. At this point it seems very possible for Ford to earn $2.00-plus per share in 2011. The level of earnings puts the current share price of $15.50 at a 7.7 multiple of forward earnings. It appears Ford is currently able to grow revenue and earnings at rates at least in the low teens. Putting a 12 multiple on our projected 2011 earnings gives a stock value of $24 per share. There seems to be a lot of upside potential for Ford if it can maintain sales momentum.
Pre-market trading has Ford up about 2.7 percent to just under $16 per share. Keep an eye on management's own projections for the upcoming quarters and any revised earnings estimates from the Wall Street analysts.
