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Market Update

Earnings on Tap: Ford

Ford's free cash flow generation is expected to improve significantly during the coming years.

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Auto giant  Ford (F) is scheduled to release its latest numbers Wednesday morning before the markets open. Wall Street analysts are expecting earnings to come in at  $0.37 per share for the second quarter, compared with $0.26 per diluted share reported in the corresponding period a year ago.

In the first quarter, the company reported pretax earnings of $2.1 billion, or $0.41 per share, on revenues of $35.8 billion. Net income reported was $1.6 billion, or $0.40 per share as the automaker logged its best-ever quarterly performance in North America. Ford's domestic market share in the first quarter expanded to 15.9% from 15.2% a year ago.

Earlier this month, automakers reported June U.S. new light-vehicle sales figures, with Ford's sales increasing 13.4% year over year (13.9% excluding the discontinued Ranger small pickup), and the company posted its best June since 2006. Car models rose 12%, utilities by 8%, and trucks by 20%.

Morningstar analyst David Whiston thinks despite the positive trend, it will take time for Ford to regain market share in the United States, as some consumers are still very loyal to Japanese and European brands. Nevertheless, Ford's products, marketing, and union contract should position the automaker to compete better than in the past, believes Whiston, who also expects Ford's free cash flow generation to significantly improve during the coming years.

The stock has gained nearly 32% since the start of the year, but is still trading lower than 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.