Just before the open of today’s market and just after its earnings release, I bought another 1/4 of my target position in Ford Motor. This puts my average cost at $11.
Bought F $12 at 9:23:08 today.
Ford quarterly earnings decline
7:21a ET October 26, 2011 (MarketWatch)
WASHINGTON (MarketWatch) — Ford Motor Co. said Wednesday its third-quarter earnings fell to $1.65 billion, or 41 cents a share, from $1.69 billion, or 43 cents a share, in the year-ago period. Revenue rose to $33.1 billion from $29 billion, but increased prices and higher demand for more expensive vehicles failed to offset a spike in raw material costs. Analysts surveyed by FactSet Research were looking for earnings of 45 cents a share, on average, with sales of $29.87 billion. For the year, the Detroit auto company said unit sales in the U.S., its largest market, would likely be at the low end of its 13 million to 13.5 million estimate. Shares of Ford declined 2% premarket to $12.20 each.
Ford Earnings Miss
Ford missed its estimate of $0.45 by $0.04 on higher raw materials. Even more disappointing the recent Consumer Reports rating on Ford was lowered.
Is there no good news in the stock? Sure, there is a ton of good news.
First good news is that Ford is likely to declare a dividend in January. “Sooner than later” was the official answer from a high ranking Ford Official regarding when a dividend will be declared.
Secondly, most of the loss in Ford was due to losses from their hedges on commodity bets. Commodity prices fell significantly in late September, including a 25 percent drop in copper and a 14 percent decline in aluminum, said Todd Nissen, a company spokesman. (Source: Businessweek) The falling prices led Ford to take a $350 million non-cash writedown to hedges for future periods. That reduced pretax operating income to $1.9 billion. Ford now expects automotive operating margins to decline this year.
How is this good news? Because this problem is not systemic and will likely be corrected for next years earnings.
More good news:
1. Ford’s U.S. auto sales rose 11 percent through September this year, outpacing the industry’s 10 percent gain, according to Autodata Corp.
2. Buyers of Ford cars and trucks paid an average of $32,945 per model in September, up 20 percent from five years ago, according Edmunds.com.
3. New UAW Contract -will raise labor costs less than 1 percent annually
4. Credit Ratings being Raised – Moody’s has said it is reviewing ratings on the automaker, which fell to so-called junk status six years ago. Standard & Poor’s raised Ford’s credit rating two levels to BB+, the highest non-investment grade, on Oct. 21, saying the new contract will not impede profitability or cash generation. Fitch Ratings upgraded Ford to BB+ from BB on Oct. 20, and assigned a positive outlook. (Source: Newsweek)