We expect the world’s leading automaker Ford Motor Co. (F) to beat expectations when it reports 2013 second quarter results before the opening bell on Jul 24.

Why a Likely Positive Surprise?

Our proven model shows that Ford is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Earnings ESP (Read: Zacks Earnings ESP: A Better Method), the difference between the Most Accurate Estimate of 38 cents and the Zacks Consensus Estimate of 37 cents, stands at +2.70%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #2 (Buy): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The combination of Ford’s Zacks Rank #2 (Buy) and +2.70% ESP makes us confident of a positive earnings beat in the second quarter.

What is Driving the Better than Expected Earnings?

Shares of Ford Motor started escalating following the release of its impressive first quarter results on Apr 24 as well as continuous improvements in the automotive market.

The stock reached new 52-week high of $17.29 on Jul 15, which is above its previous level of $17.11 a day before. Its last closing price of $17.04 represented an impressive one-year return of nearly 90.0% and strong year-to-date return of 31.0%.

Ford posted an increase of 4.1% in earnings to $1.6 billion and 5.1% in earnings per share to 41 cents in the first quarter, beating the Zacks Consensus Estimate by 3 cents. Revenues improved 10.5% to $35.8 billion, exceeding the Zacks Consensus Estimate of $32.8 billion. The increase in revenues and earnings was mainly attributable to Ford’s strong performance in North America and Asia Pacific Africa.

Further, since Dec 2007, auto sales in the U.S. saw the fastest pace of growth (15.96 million units) in June this year. The increase was largely attributable to a growing popularity of pickups among buyers amid improvements in housing, construction and energy sectors. Detroit’s Big Three, including Ford, General Motors Company (GM) and Chrysler, sold 157,480 full-size pickup trucks during the month, up 25% from Jun last year.

Ford’s European market is also stabilizing after years of sales declines. The automaker’s sales in the continent grew 6% in June despite a 6.5% fall in industry sales. The company expects European operations to be profitable in 2015.

Ford is also performing well in the emerging markets, particularly China. In fact, Ford is the fastest growing global automaker in China presently.

Ford’s sales soared 47% to 407,721 vehicles in the first six months of the year in China, which is more than the total industry sales growth of 17%. Ford plans to triple its line-up in China by introducing 15 models by 2015.

Other Stocks to Consider

Ford is not the only bullish stock in the automotive industry this earnings season. We also see likely earnings beats coming from the following industry peers:

Tesla Motors Inc. (TSLA): Earnings ESP of +16.67% and Zacks Rank #1 (Strong Buy).

Group 1 Automotive Inc. (GPI): Earnings ESP of +1.41% and Zacks Rank #3 (Hold).

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Read the Full Research Report on GM

Read the Full Research Report on GPI

Read the Full Research Report on TSLA

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