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Market Update

Earnings on Tap: Ford Motors

Will improving demand continue to drive Ford's performance?

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 Ford Motor (F) will be releasing fourth-quarter results before the markets open Tuesday. Analysts, on average, are expecting earnings of $0.26 per share compared with $0.20 per share, excluding one-time items, reported in the final quarter of the previous year.

In the third quarter, the automotive giant posted a record pretax operating profit of $2.2 billion, driven by strong North American results. Ford North America achieved its highest quarterly profit and operating margin since at least 2000, which helped offset weakness in Ford's European and South American segments.

Earlier this month, Ford reported a significantly higher year-over-year percentage improvement in car segments compared with light trucks.

The company also recently filed a 30-year bond offering prospectus with the SEC. Ford intends to use the money to redeem more expensive existing debt and to "accelerate" pension plan contributions in 2013.

Morningstar analyst David Whiston thinks the deal is favorable as interest rates are currently very low and as the underfunded pension is a severe overhang compressing Ford's price/earnings multiple. However, Whiston is concerned how Ford will meet its previous forecast of about $10 billion of automotive debt by middecade, following the issuance of this fresh debt.

The stock has jumped more than 30% during the last quarter, but is still below Morningstar's fair value estimate.

Gazala Parveen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.