Ford Motor (NYSE:F), America’s second largest automaker, finished the year on a solid note by registering 90% year over year increase in profit in the fourth quarter. The Detroit automaker should thank the one-time tax gain for the incredible profit rise. The quarter results were also supported by healthy sales in the carmaker’s North American and Asian market. Let’s take a brief look at some essential figures of the quarter.
Delving deep into the numbers
Ford crushed analyst expectations with better-than-expected numbers that pulled company shares up by 2% right after the carmaker announced its quarter results. Alan Mulally, Ford’s Chief Executive said that the carmaker’s “One Ford” plan was one of the prime catalysts that made 2013 “an outstanding year”.
The American auto giant saw sales amounting to $37.6 billion for the quarter, up 4% from a year ago quarter. The company yielded net income of $3.04 billion for the fourth quarter, up 3% from last year quarter. Both the top and bottom line topped street expectations. For the entire year, the fifth largest auto players booked $146.9 billion in revenue and reported $7.15 billion in profit.
- Warning! GuruFocus has detected 4 Warning Signs with F. Click here to check it out.
- F 15-Year Financial Data
- The intrinsic value of F
- Peter Lynch Chart of F
The New F-150 Tremor, Source: Company website
Sales volume was pretty strong in North America and Asia Pacific region. Solid revenue in North America was vastly driven by the growing demand for full size pickup trucks. The company’s fantastic product lineup in North America also aided the growth in this market. On the other hand, sales in South America tumbled 13% for which the unfavorable currency exchange is to be blamed. The company tried to compensate this by keeping prices relatively higher.
Strangely Europe emerged as a strong market for Ford registering sales growth of 9% during the quarter. Asia Pacific Africa also stood strong with 18% sales gain.
Keeping the momentum on
Mulally is quite confident that Ford would register solid results in the current year as well. The company is in the middle of its restructuring program (the One Ford plan) to work together a “global enterprise” and deliver fresh models at a faster rate and give higher value to its customers. This would automatically have a positive impact on the overall profitability of the company.
The U.S. auto industry is seeing a rebound with sales nearing prerecession levels. Industry analysts estimate U.S. sales volume to be in the range of 16 million to 16.5 million in 2014, an increase of 5.8% over 2013. Although this is still below the prerecession market average of 16.7 million, the rebound is good enough to boost automakers’ sales. The sales of U.S. light vehicles saw a steep plunge from 16.1 million in 2007 to 10.4 million in 2009. However both General Motors (NYSE:GM) and Ford are benefitting with the rebound in the housing and construction sector after years of distressed sales.
Ford has plans to invest in building plants and add to the current workforce. In addition, there are several launches slated for the year, of which 16 are for the North American market. Such huge amount of capital spending indicates that profit margins would fall this year. However, in 2015 the company would see better margins and start reaping the benefits of added capacity. General Motors has already passed this phase after its recent investment. Now the company is waiting to get the sweet results of its investments made in the past. The top U.S. automaker’s profits are expected to get a big boost in the current year and the next one as well.
Ford is poised for another good year as the company expects to maintain pretax profit to be in the range of 7-8 billion for the full year. It has huge spending plans for the year, which could squeeze profit, but prove beneficial for the coming years. This automaker is set with an excellent product lineup and I believe it will leave no stone unturned to make the most out of the recovering U.S. auto market.