Ford Stock Up After Earnings Beat As Chip Woes Drag On

Ford Motor (F) reported a surprise second-quarter profit and raised guidance after the close Wednesday, even as the global chip shortage continues to dog the industry. Ford stock rose.


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 $24.13 billion. Adjusted EBIT
was $1.1 billion.

After warning in April that Ford would lose about 50% of its planned second-quarter production, the company said Wednesday that strong demand, lower incentives and a favorable mix of vehicles helped exceed its earlier view.

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. Meanwhile, average transaction prices in Q2 rose $6,400 over a year ago to $47,800 per vehicle.

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 profitable pickup trucks and SUVs and some had returned to production after cuts earlier in spring.

Ford had warned in April that the chip shortage would force it to halve Q2 production and could linger into 2022.

Outlook: Ford raised its 2021 adjusted EBIT outlook to $9 billion-$10 billion and its free cash flow view to $4 billion-$5 billion, citing strong orders and an improving chip supply. Volume is expected to increase by about 30% sequentially from the first to the second half of the year.

In April, Ford forecast 2021 adjusted EBIT of $5.5 billion-$6.5 billion, including a $2.5 billion negative impact from the chip shortage. It had expected to generate $500 million-$1.5 billion in adjusted free cash flow for the year, down from a prior view.

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Ford Stock

Shares rose 2.8% late after closing up 0.5% at 13.86 in the stock market today. Ford stock has almost erased gains from a May breakout past 13.72 and there’s no new buy point for now, according to MarketSmith chart analysis. The relative strength line for Ford stock has fallen from its May 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 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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