DETROIT (Bloomberg) -- Ford Motor Co. may post its highest first quarter North American profit ever, the latest sign the automaker's comeback is gaining momentum.
Ford probably earned a record $2.7 billion pretax profit in North America during the first three months of the year, according to analyst estimates at Morgan Stanley and JPMorgan Chase & Co.
If those predictions hold up, the strong financial performance is largely thanks to a well-received lineup of new cars, led by the mid-size Fusion and compact Focus. And with renewed demand for pickups, the company has earned the biggest U.S. sales gain among top automakers in the quarter.
It's early in the year and Ford faces numerous challenges, chief among them cratering demand in Europe, a weakening yen that's giving Japanese automakers a boost in the U.S. and a poor showing in the luxury market. Still, Ford continues to impress with its ongoing reinvention of its cars and trucks.
"The double benefit of new product in the car segments and the very strong industry pickup demand created what seems like a picture-perfect quarter for Ford in North America," Itay Michaeli, an analyst at Citigroup Inc. who recommends buying Ford stock, said by phone. "They're really in a sweet spot."
First quarter North American profit margin may have topped 12 percent, according to Morgan Stanley and JPMorgan. To stay there, CEO Alan Mulally needs to keep Ford's vehicle lineup fresh as he strives to make further gains in the car and utility segments. That won't be easy as a weakening yen gives Toyota Motor Corp. and Honda Motor Co. an edge.
The Fusion, which logged its best-ever quarterly U.S. sales, is combining with the Focus compact in leading Detroit's best lineup of American cars in a generation. First-quarter automotive revenue, to be released Wednesday, probably rose 10 percent to $33.6 billion, the average of 11 estimates compiled by Bloomberg, from $30.5 billion a year ago.
Just as Detroit's cars are making strides, the full-size pickup market is coming back. Led by rebounding demand for F-Series, the best-selling vehicle line in the U.S. for 31 years, large trucks' share of the U.S. auto market climbed to 11.7 percent in the first quarter, from 10.6 percent a year earlier, according to researcher Autodata Corp.
As the Japanese yen declines in value, strong truck products become increasingly crucial for Ford. Trucks are the "first barrier of defense" against a yen that has nearly weakened beyond 100 per dollar for the first time in four years, Citigroup's Michaeli said.
Toyota shares surged 39 percent this year through Monday in Tokyo trading, Nissan Motor Co. had increased 30 percent and Honda had risen 24 percent as the Bank of Japan's deflation-fighting measures fuel the yen's longest streak of monthly losses in more than a decade. Ford, by comparison, has risen 0.8 percent this year, while GM has gained 1.5 percent.
"The yen can go to 110, but there's not much they can do to disrupt what will be a tremendous out-performance of pickup truck sales relative to the market," Michaeli said. "In the next 12 months, there will be an arm wrestle between a weak yen and pickups. We think pickups will win that arm wrestle."
Other currency moves, led by Venezuela's devaluation in February, and trade restrictions by Brazil and Argentina also are denting Ford's results in South America. The company has said it will lose about $300 million there this quarter.
Ford has forecast it will lose about $2 billion in Europe this year, compared with a loss last year of about $1.75 billion.
The losses in Europe and South America may spur a drop in operating profit per share to 37 cents, the average of 17 estimates compiled by Bloomberg, from 39 cents a year earlier.
The bright side for future results is that much of the money Ford will lose in Europe over the near term won't be repeated, said Adam Jonas, an auto analyst at Morgan Stanley.
The three European factories Ford plans to shutter by 2014 are leading to disruptions across its network of plants as production is consolidated, Jonas said by telephone. Those three closures will eventually save Ford $500 million a year.
Ford has deferred by a year the introduction in Europe of the Mondeo, sold in the U.S. as the Fusion, because it's now built at one of the plants due to be shut, at a cost of about $200 million, Jonas said. And the company faces about $400 million of accelerated depreciation this year that will not recur once the three factories close, he said.
Europe is "a very controlled mess for Ford," said Jonas, who is based in New York and rates the shares the equivalent of a buy. "Ford is very blunt about how weak the market is, but they are very confident and excited about the improvement that is going to come."
That leaves the luxury market, which remains one of the company's biggest headaches. Sales for its Lincoln line plunged in January to the brand's worst monthly showing in almost 32 years as production of the MKZ sedan was slowed for quality checks. Ford said supply would be up to normal this month.
Lincoln deliveries in the first quarter fell 24 percent from a year earlier, the most of any brand with at least 100 sales, to 15,899. A single car in Toyota's premium Lexus line -- the ES sedan -- outsold the entire Lincoln brand by itself in the first three months of the year.
Still, Ford's renewed car and truck lineup has it faring better than it has in years.
Ford "can be competitive regardless of where a customer wants to come into the market, whether it's at the entry level, the truck level or the crossover/SUV level," Kevin Tynan, an auto analyst for Bloomberg Industries, said in a telephone interview.