This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Europe's a Drag, but for Ford It's Priced In - Analyst

DETROIT ( TheStreet) -- The impact of Europe's economic decline will be closely watched as U.S. global transportation companies report earnings -- particularly on July 26, when Ford (F - Get Report), UPS (UPS - Get Report) and Delta (DAL - Get Report) all report.

Each has a major presence in Europe. Ford is Europe's second-largest automaker. UPS is the leading U.S. overnight package company in Europe, while FedEx (FDX - Get Report) has a bigger presence in Asia. Delta has the largest trans-Atlantic system of the U.S. airlines.

Among them, Ford appears to have the most exposure. The automaker has already said it will lose about $570 million in Europe in the second quarter.

Meanwhile, GM (GM - Get Report)last week removed the head of GM Europe and temporarily replaced him with Vice Chairman Steve Girsky. GM is expected to have losses in Europe when it reports second-quarter results on Aug. 2.

In a recent report, UBS analyst Colin Langan wrote that Ford's European losses are already priced in to the share price. Partially as a result, "Ford offers better risk/reward than GM," he said. Since Ford's June 28 announcement of its projected losses, its shares have declined 6%, while GM shares have been flat.

Ford is outperforming GM in North America, where its production is up 4% to GM's 2%, with Ford's increase disproportionately including profitable full-size pickup trucks, Langan said. In Europe, he expects single-digit production declines for both companies.

"Near-term upside could be limited given EU headwinds," he wrote. His full-year earnings estimates are $1.45 a share for Ford and $3.60 for GM, while analysts surveyed by Thomson Reuters estimate $1.31 for Ford and $3.21 for GM.

Still, Langan has buys on both companies due to low valuations. Meanwhile, S&P Capital IQ analyst Efraim Levy has a buy on Ford, but on Tuesday he reduced his full-year estimate to $1.34 a share and his 12-month price target to $13 "to reflect deteriorating performance in certain international markets, particularly Europe." Ford lost market share in Europe in June, Levy wrote.

As for GM, analysts estimate second-quarter earnings of 76 cents a share. Jefferies analyst Peter Nesvold estimates 75 cents, noting in a report that "GM has posted an annual loss in Europe for the past 12 years in a row, totaling $12.4 billion in losses, (while) Ford has earned a profit in the past seven out of eight years in Europe, for a cumulative $2.95 billion profit."
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
DAL $41.67 -2.80%
FDX $165.08 -0.35%
F $13.53 -4.00%
GM $31.79 -2.00%
UPS $105.09 0.17%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs