Earnings from Ford and ADS

We had two more Buy List earnings reports this morning. Both Ford and Alliance Data Systems beat estimates, but ADS is getting hammered on poor guidance.

For Q4, Alliance Data Systems (ADS) earned $4.13 per share which beat estimates by two pennies. Revenues increased by 17.7% to $1.75 billion. That was just below the forecast of $1.79 billion. Currency dinged them for 12 cents last quarter. For the year, the company made $15.05 per share of which forex knocked off 46 cents.

Ed Heffernan, president and chief executive officer of Alliance Data, commented, “It was an exceptional year for Alliance Data as we drove 20 percent growth in both revenue and core EPS despite substantial FX headwinds. Overall, the scorecard for all three segments is largely positive.

The problem is guidance. For Q1, ADS sees earnings of $3.83 per share. That’s well below Wall Street’s estimate of $4.14 per share. The company sees revenue rising to $1.68 billion which was below Wall Street’s forecast of $1.78 billion. The strong dollar will still be an issue. In constant currency terms, ADS expects earnings of $3.93 and revenue of $1.72 billion.

Still, Alliance Data is standing by its full-year forecast for earnings of $17 per share. The shares have been down as much as 13% today.

This morning, Ford (F) reported Q4 earnings of 58 cents per share. That beat estimates by seven cents per share. For the year, the company had a pre-tax profit of $10.8 billion. Revenues rose 12.1% to $37.9 billion which beat estimates by $36.27 billion.

Chief Financial Officer Bob Shanks maintained the Dearborn, Mich., auto maker’s forecast for equal or higher operating results in 2016, saying the company’s operations outside the U.S.—representing only a fraction of the auto maker’s profitability last year—are set to blossom.

“This isn’t just a North America story,” Mr. Shanks said, referring to last year. “We really started to see the international markets come forward.”

I think these are pretty good numbers but Wall Street is unimpressed. The stock is down today but some of that could be due to the special dividend and regular dividend being paid out yesterday. I think Wall Street is convinced that the auto cycle has peaked and Ford’s earnings and margins will suffer from here.

For guidance, Ford said they expect to earn a pre-tax profit this year in the upper half of their previous range of $10 billion to $11 billion.

Posted by on January 28th, 2016 at 10:15 am

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