Friday, January 28, 2011

Ford 4Q10 Earnings 1/27/11

Ford Motor reported its best full-year profit in more than a decade, but weaker-than-expected fourth-quarter earnings. Net profit for 2010 totaled $6.6 billion, or $1.66 per share, an increase of $3.8 billion above 2009. However, Ford’s fourth -quarter earnings fell 79% to $190 million. These results include a previously disclosed one time charge of $960 million as part of its balance sheet restructuring. Ford fell short of analyst earnings estimates of $0.48 by 37%, reporting earnings of only $0.30. Ford had beaten expectations for each of the past seven quarters.

4Q earnings also showed Ford Europe’s operating loss of $51 million, compared with a $253 million profit a year earlier. Chief financial officer, Lewis Booth described the surprising results in Europe as “a little bit of a disappointment”. He also said: “We were very clear, though, that we were not going to chase market share.” The European operation is expected to return to profitability this year.

In 2010, Ford paid over $14.5 billion in debt, ending the year with $19.1 billion in debt. Cash revenues totaled $20.5 billion shifting Ford from $8.7 billion in net debt a year ago to net cash of $1.4 billion. Ford plans to continue to reduce the amount of debt they have on their balance sheet through 2011.

Ford shares were hit by the weak earnings, falling by $2.39 or 12.72% to 16.40. Other then the stock plunge the earnings report for Ford was great. Ford showed its ability to grow profits in 2010 and is expecting to continue in 2011. A key concern looking to the future will be whether or not Ford can maintain healthy profit margins.

- Michael Biagi, Junior Analyst

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