JP Morgan Comments On Ford Following Recent Earnings Release

According to a recent report from JP Morgan, Ford's F Q1 results showcased a welcome rebound in NA margins, partly offset by perhaps some unsustainability to European and FMC profits. The company, clearly having taken cues from the messy stock price reaction post-Q4, tried to aggressively manage earnings expectations for this year by: explicitly guiding to $4B of higher combined commodity and structural cost pressures, and by stating that “quarterly results in the latter part of the year may not be as strong as the first quarter”. JP Morgan believes Ford's mix, particularly pricing, that is notably aided by the Japan quake, will fully cover these now higher cost expectations. JP Morgan's FY2011E EPS is bumped up $0.05 (to $1.90) of which $0.02 represented by the Q1 upside relative to its model. Outer year estimates ($2.00 in 2012, $2.25 in 2013), $20 PT, and Neutral rating remain unchanged. While the auto sector is likely to trade well during this earnings season, this is likely not the start of a multi-month sector rally given what could be ~5% sequential SAAR compression in May/June due to Japanese OEM production challenges. JP Morgan expects the group to work better around mid- summer. Ford closed Tuesday at $15.66