Ford to Post 2010 Q1 Earnings of More Than $1 Billion

Ford will most likely post earnings in excess of $1 billion tomorrow, marking the carmaker’s first bout of four consecutive profitable quarters since 2005 when CEO Alan Mulally reined in the practice of discounting.

According to estimates by industry analysts, Ford’s net income for the first quarter will likely be $1.2 billion. The carmaker’s U.S. deliveries rose by 37 percent in March, which is more than double the industry average. Car-shoppers may have also selected more expensive options, helping create more revenue per vehicle sold.

“There's a lot of momentum at Ford right now in terms of customers' perception of their products,” explained Efraim Levy, an equity analyst for Standard & Poor's in New York, who recommends holding shares of the company. “We're hitting the point where it's time to give them the benefit of the doubt, rather than view them with skepticism.”

The 64-year-old Mulally placed resuscitating the Ford brand at the heart of his strategy to overhaul the second-largest carmaker in the United States after he came from Boeing in 2006. Ford’s revenue for the first quarter probably increased by 13 percent to $28 billion according to the average of seven analyst estimates.

Undoubtedly, Ford has profited from the federal bailouts of Chrysler and GM as well as Toyota’s colossal recalls earlier this year, analysts believe.

On the other hand, that advantage may begin to diminish with Toyota providing historic incentives to generate U.S. sales, GM repaying government bailout money, and Chrysler reporting an operating profit for the first quarter.

Sustainability Is Key

Consistency will be essential as Ford tries to create a positive cash flow, lower a huge debt load, and gradually earn back an investment-grade credit rating, industry analysts say.

“Ford needs to show six to eight quarters of solid results consecutively to show it is really turning the corner," explained Mirko Mikelic, a Fifth Third Bank senior portfolio manager.

If Ford continues to show strong results for a few more quarters and hold its U.S. market share, then its equity and bonds will perform well and eventually the carmaker will reclaim its investment-grade rating, Mikelic noted.

Ford took out loans of more than $23 billion in 2006 to fund a turnaround effort spearheaded by Mulally that mortgaged most of the assets it had left, including the blue-oval logo.

Executives at Ford have described the restructuring as a work in progress it its fledgling days with the economy staying unpredictable at best.

Ford concluded 2009 with automotive debt of $34.4 billion, and the automaker has prioritized debt reduction, a goal that will be more attainable as financial reports improve.