Built Ford Tough?

Whether it’s been the constant bombardment of huge news items this week or the lack of any important economic event this morning, the pre-market stories were boring today. The lack of interesting news led me to Ford Motor’s (NYSE: F) fiscal 2011 financial results.

The car manufacturer had an impressive quarter on the surface. Despite a slowdown in Europe that caused a decline in sales and a major flood in Thailand that disrupted Ford’s distribution network, management reported that net income rose to $13.6 billion, or $3.40 per share. To put that in context, last year Ford recorded a profit of $190 million, $0.05 per share.

The astonishing 6,700% increase to net income came with a crafty accounting maneuver, however. As it turns out, the big gain to net income was the direct result of a one-time tax incentive. Without the tax break Ford would have made $1.1 billion or $0.20 per diluted share. The revised net income also missed analyst EPS expectations of $0.25 for Ford.

The $0.05 miss in EPS is understandable. Ford not only had to battle increased production costs (due to higher input prices), but also lost the production of 34,000 cars in Thailand’s flood. Despite the miss growth was still strong, but with everyone else beating financial estimates misses are not often well received.

Also, the accounting magic that allowed Ford to post an additional $12.4 billion has a positive message. Ford was allowed to take that tax incentive only when it deemed the company to be in a long-term period of stable profitability. If Ford is accurate about their long-term prospect it has to be a positive sign for consumer spending down the road. But F shares are down 5% this morning because you can’t miss estimates that badly and get away with it.