Ford Posts Mediocre Earnings, And Investors Pay

Ford’s (NYSE: F) earnings were disappointing, and investors paid with a 4% drop in shares in the pre-market. Although US sales were good last year, compensation costs helped keep margins down. Asia-Pacific and Europe sales were weak. Europe is to be expected. Ford should not be lagging in the hot markets in Asia

The company said that fourth quarter pre-tax operating profit was $1.1 billion, or 20 cents per share, a decrease of $189 million from fourth quarter 2010. Ford has posted a pre-tax operating profit for 10 consecutive quarters. Revenue for the period was $34.6 billion up $2.1 from the year before’s quarter

Ford reported fourth quarter net income of $13.6 billion, or $3.40 per share, an increase of $13.4 billion, or $3.35 per share, from the fourth quarter of 2010. This includes the favorable impact related to releasing $12.4 billion of the valuation allowance. Ford began to record a valuation allowance against net deferred tax assets in the third quarter of 2006, reflecting large cumulative losses incurred, as well as its financial outlook at the time. Consistent delivery over the past few years of strong improvement in the company’s business results now supports the release of almost all of the valuation allowance.

Total Automotive pre-tax operating profit in the fourth quarter was $586 million, a decrease of $155 million from fourth quarter 2010. The decrease is explained by higher costs, including higher commodity costs, higher compensation costs in North America related to the new UAW agreement (including the one-time ratification bonus), and unfavorable exchange rates. This was offset partially by favorable net pricing and volume and mix.

To be fully successful with numbers like this:

In the fourth quarter, Asia Pacific Africa reported a pre-tax operating loss of $83 million, compared with a profit of $23 million a year ago.

Douglas A. McIntyre