Ford Beats With Surprise Profit, Lifts Outlook Despite Chip Woes

Ford Motor (F) reported a surprise profit for the second quarter and raised earnings and cash flow guidance for the full year Wednesday, despite the global chip shortage. Ford stock rose late.




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The results come after Tesla (TSLA) CEO Elon Musk said Monday that the chip crunch remains serious and is hard to predict. And last week, chip giant Intel (INTC) warned shortage could stretch into 2023.

Ford Earnings

Estimates: Wall Street expects Ford to narrow net loss per share to 3 cents from 35 cents a year ago. Revenue is seen growing 19% to $23.01 billion, as the automaker laps the pandemic trough in the year-ago quarter, according to FactSet.

Results: EPS of 13 cents on automotive revenue of $24.128 billion and total revenue of $26.752 billion.

Strong vehicle demand, lower incentives and a favorable vehicle mix helped Ford exceed its earlier view, the company said. In fact, Ford generated adjusted earnings before interest and taxes of $1.1 billion, despite a big hit to Q2 vehicle production and volumes due to the chip shortage.

In Q2, Ford grew U.S. new vehicle sales 20% year over year. But Ford’s sales were down 20% vs. the same quarter in 2019. However, Ford’s average transaction prices rose in Q2, amid demand for SUVs and trucks.

Outlook: Ford raised its 2021 adjusted EBIT outlook by about $3.5 billion to $9 billion-$10 billion, citing strong orders and an improving chip supply. It hiked its free cash flow view to $4 billion-$5 billion, from $500 million-$1.5 billion prior. Ford tied the higher forecast in part to expectations that vehicle volumes will increase by about 30% in the second half of the year vs. the first.

Exiting Q2, orders in the U.S. for the new Mustang Mach-E electric crossover and other vehicles were seven times larger than at the same point in 2020, Ford said. And more hotly anticipated new vehicles, such as the Bronco SUV, as well as the Maverick and F-150 Lightning all-electric pickup trucks, are already here or on the way.

“We are now springloaded for growth” in the second half of 2021 and beyond, Ford CEO Jim Farley said on an earnings call.  The F-150 Lightning electric truck now has more than 120,000 orders, up from 100,000 around mid-June, Farley said. And the smaller Maverick electric truck has 80,000 orders, up from 36,000 in mid-June.

Meanwhile, Ford’s seeing improvement in the supply of chips, but the situation “remains fluid,” Farley cautioned.

On June 30, Ford said the auto chip shortage will again force it to cut production across several U.S. factories this month. Affected factories produce Ford’s highly profitable pickup trucks and SUVs and some had returned to production after cuts earlier in spring.


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Ford Stock

Shares rose 3.9% late after closing up 0.5% at 13.86 in the stock market today. Ford stock could flash an early buy signal if it retakes the 50-day line Thursday, according to MarketSmith chart analysis. The relative strength line for Ford stock has fallen from its early June peak.

General Motors (GM) rose 0.9%, Tesla (TSLA) added 0.3% and Stellantis (STLA), formerly Fiat Chrysler, gained 0.6%.

While dealing with the chip shortage, Ford continues a massive shift to electric vehicles. The No. 2 U.S. automaker announced in May that it would spend more than $30 billion on electrification by 2025, up from $22 billion earlier. Ford expects 40% of global sales to be fully electric by 2030.

However, Ford sees gas or diesel vehicles remaining a part of its commercial business.

In contrast, General Motors plans to go all-electric by 2035. GM recently upgraded its own investment on EVs and AVs (electric vehicles and autonomous vehicles) to $35 billion, up from $27 billion.

Ford’s new Mustang Mach-E electric SUV, key to its EV goals, is selling well. And a partnership with hot Chinese EV stock Nio (NIO) allows Mach-E buyers in China to plug into Nio’s EV charging network in that country.

Two key new EVs loom. An all-electric Ford Transit commercial van goes on sale late this year. The F-150 Lightning, Ford’s first all-electric pickup truck, follows by mid-2022.

Find Aparna Narayanan on Twitter at @IBD_Aparna.

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