Ford skyrockets after raising earnings forecast and reinstating dividend

(Bloomberg) – Ford Motor Co., in charge of large investments in electric vehicles, raised its full-year profit forecast and said it would reinstate its dividend, pushing the stock up to 11% .

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The automaker has raised its 2021 profit forecast for the second time in as many quarters and is now forecasting earnings before interest and taxes of $ 10.5 billion to $ 11.5 billion. The reinstated quarterly dividend of 10 cents per share will be paid on Dec. 1, the company said. Ford suspended payment at the start of the pandemic in March 2020.

Ford attributed the good results to a decline in the critical semiconductor shortage – an issue that still haunts most automakers – as well as strong demand for its vehicles. Ford has racked up the largest vehicle inventory in the industry and increased average selling prices 13% to $ 51,460, according to researcher Edmunds.com.

“We are fully invested in this future and we are taking big swings,” CEO Jim Farley said on a call with analysts. “We are acting aggressively to lead the electric vehicle revolution. “

Farley said the company has an annual demand for 200,000 Mustang Mach-E electric SUVs and is quickly working to increase production of electric vehicles. The automaker begins building the Mach-E in China, increasing production in Mexico.

By the mid-2020s, Ford will have the plant capacity to build more than one million battery-electric vehicles per year. “And I think we’ll need more,” Farley said.

As Ford sees the chip shortage easing, CFO John Lawler told reporters it could still run until 2023. Ford factories will not be operating at full capacity until the end of the year. next year, he said.

“We are seeing sales growth of around 10%” in 2021, Lawler said. “And we see that the flea strain will always hit us.”

Third-quarter profit was 51 cents per share excluding certain items, beating the 27-cent average of analysts’ estimates, the automaker said. Revenue rose to $ 35.7 billion, beating expectations. The results marked the sixth consecutive quarter Ford has beaten analysts’ estimates, according to Dan Levy, an analyst at Credit Suisse.

Rise in shares

Ford shares hit $ 17.17 early in Thursday after closing at $ 15.51 on Wednesday. The stock has more than doubled since Farley took over as CEO a year ago.

Read more: GM drops as Barra predicts chip shortage through 2022

Earlier Wednesday, General Motors Co. beat third-quarter estimates, but warned that the chip shortage that has held back vehicle production could persist until 2022. Volkswagen AG on Thursday lowered its annual delivery forecast, but semiconductor supply is expected to improve steadily this quarter and throughout next year.

Ford, which suffered more than most from the chip crisis in the first half of the year, managed to increase the number of cars on dealership lots in September, ending the quarter with 236,000 vehicles in inventory.

It helped the company become the top seller in the United States in September, overtaking GM and taking 11.7% of the US auto market in the quarter, up from 10.6% in the second quarter, according to Edmunds.

Ford Credit

Ford’s financial arm and its North American operations continued to generate profits, with Ford Credit posting earnings of $ 1.1 billion before interest and taxes, unchanged from the previous year. The credit unit benefited from record prices for used cars due to the shortage of new and used vehicles.

Ford had a third quarter profit margin of 10.1% before interest and taxes in North America and is at 9% so far this year. Results in its home market stood out from losses in other regions, although the automaker managed to turn a profit in South America for the first time in eight years.

  • In North America, Ford earned $ 2.42 billion before interest and taxes, up from $ 3.2 billion in the third quarter of last year. Vehicle sales in the United States fell 27% in the quarter due to the chip crisis, but that was less than the 33% drop recorded by GM.

  • In Europe, Ford recorded an EBIT loss of $ 52 million, compared to a deficit of around $ 440 million last year. Vehicle sales in the 20 main European markets fell by 35% compared to the previous year.

  • In China, Ford recorded a loss of $ 39 million, less than its shortfall of $ 58 million a year earlier. Ford’s vehicle sales in China fell 8.7% in the third quarter as floods and pandemic restrictions hit parts of the country.

  • In South America, Ford made a profit of $ 2 million before interest and taxes, compared to a loss a year earlier. Lawler said it was Ford’s first profit in this region since 2013.

Farley wowed investors by rushing to close loss-making factories in Brazil and India, while increasing investment in electric vehicles by a third to $ 30 billion by 2025. Ford plans to have 40% to 50% of its global fully electric sales volume by 2030.

The automaker last month revealed plans to spend $ 11.4 billion with South Korean SK Innovation to build four factories in Tennessee and Kentucky to make F-series batteries and electric trucks. Stanley claims Ford’s Mustang Mach-E, launched a year ago, has become the best-selling electric car without the Tesla name.

The CEO supplemented this by poaching Apple Inc.’s top-secret car project leader Doug Field last month to lead Ford’s cutting-edge technology efforts.

“The culture is starting to change to be faster, more accountability, less bureaucracy,” Farley said. “The proof is in the pudding.”

(Updates with early trading in the first and 10th paragraphs.)

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