The automobile industry is on an uptrend as the retailers witness higher unit sales in the previous month. Vehicle sales, on an annualized basis, in the month of June rose to 16.98 million units, much higher than 16.7 million in the previous month. On the other hand, analysts were expecting it to be at 16.38 million units. Therefore, automakers too are expected to benefit from the growing demand and the upcoming quarterly results would be better.
One of the leading players, Ford (NYSE:F) is expected to report its second quarter results this week. Let us check what analysts expect from this company.
Analysts expect the top line to increase slightly to $36.27 billion as against last year’s figure of $36.08 billion. However, earnings are expected to drop to $0.37 per share from $0.45 per share in the prior year’s quarter. Ford has mostly been ahead of the estimates. It beat the expectations in the 3 quarters, out of the last 4 quarters reported.
- Warning! GuruFocus has detected 5 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
Ford’s past performance hasn't been very impressive. It reported its June numbers recently which were not so attractive. Sales declined 6% over last year, clocking in at 222,064 vehicles for the month. Also, retail and fleet sales fell 5% and 7%, respectively. However, Ford Fusion was one of the bright spots as it posted sales of 27,064 units in the month of June. This was the best June performance of the company.
The fall was due to the cut back of discounts by the company. Discounts on the F- series pickup, the most popular being F-150, were cut which hampered sales. Also, Ford had to make a number of recalls of many vehicles since it had defective engine.
On the other hand, peer General Motors (NYSE:GM) reported an increase of 1% over last year. This was despite so many recalls made by the company in the last one year. The growth in sales was mainly because of General Motors’ new range of SUVs, which hit the market recently. Customers’ preference had shifted to bigger vehicles off late. Therefore, the launch of SUVs was made at the right time.
Key points to note
Ford has taken some initiatives to drive more customers to its stores. One of the key moves was to launch the New 2015 Mustang last year. This new car was available in the more powerful V6 and V8 engines. However, the automaker declared its plans to introduce a new Mustang with EcoBoost engine which has the best power density. This new version will be released later this year and should help the company lure people.
Further, Ford has announced its plans to launch 25 new models by 2016, in regions such as Middle East & Africa. These regions are expected to grow by 40% by the end of this decade. The new products include the new Mustang, Fusion, Focus and Ranger, among many others.
Although Ford has a number of new products in the line-up, it is difficult to say how people would react to each of them. Moreover, its expansive measures in the Middle East and Africa should also be fruitful. However, the cost related to recall of 920,000 vehicles should continue to weigh on the bottom line. Therefore, one should stay on the sidelines and wait for the right opportunity. Till then, keep a track of this auto maker.