Chew On That: Ford Announces $8.3 Billion Profit
Ford did not disappoint and today announced its biggest annual profit in a decade. According to a Ford release, the company booked $8.3 billion in pre-tax profits for 2010. That is a $3.8 billion increase from a year ago.
Ford ended 2010 with Automotive gross cash exceeding debt by $1.4 billion, an improvement of $10.1 billion from year end 2009. Ford ended 2010 with $20.5 billion of Automotive gross cash, and a debt of $19.1 billion.
Fourth-quarter net income fell to 5 cents per share from 25 cents per share after a $960 million charge for completing a debt conversion in the third quarter. The fickle stock market did not like that. The F share lost 6.3 percent in premarket trading. It dragged down GM,which lost 2.1 percent to $37.84 before the bell.
Ford is up 50% since last summer, the fickle stock market seems to be rewarding Ford for a job well done.
Technically Ford did disappoint. Wall Street (I know, the root of all evil) was expecting adjusted EPS of $0.48, Ford did $0.30. Also, the operating loss in Europe is a concern. The stock was down almost 4% in the pre-market. But that's just the "smart money" - Back envelope look at the numbers was operating profit of $1000 per vehicle globally (4.8% op margin). At current global share, every million units to the world total gets Ford $83 mn in operating profit at steady margins. Being the "dumb money", I'd feel pretty good about Ford longer term and consider a selloff as a "limited-time-only, price rollback" sale. My concern would be that except for interest expense, there are not a whole lot of costs to take out of the system presently. So rev and earnings growth has to come from increasing volumes and/or market share grab. Which is mostly fine for the US and BRICs. However, with the ramp in production will come a ramp in related costs. Plus, raw materials should be a concern as will be labor costs as profitability is established - equality of gain and all that. Looks to me like cost structure will never be as lean as it is in this post-carpocolypse window. I worry about business as usual as business returns to usual.
That's great for Ford, but they're certainly not out of the woods anymore than GM or Chrysler is. All the OEMs are fighting for market share in what certainly will be a shrinking market as the world system races to the bottom. I think they'd be doing far better if they re-named the Taurus to the Galaxie 500 as god intended - it certainly looks like it should carry that name. It would sell better, and I may actually entertain the thought of buying one.
Could someone explain to me why Ford is down 12 percent? That's it, f%^&k it, I'm BUYING. Shouldda done it when it was 1.50, but at 16.50 it's not bad of a deal, either.