Ford raises 2020 profit outlook after beating estimates

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The Ford 2021 Bronco SUV is seen on the assembly line at Michigan Assembly Plant in Wayne, Michigan, U.S., June 14, 2021. REUTERS/Rebecca Cook

July 28, 2021

By Ben Klayman and Paul Lienert

DETROIT (Reuters) -Ford Motor Co on Wednesday boosted its 2021 profit forecast after reporting better-than-expected quarterly results, lifting the No. 2 U.S. automaker’s shares more than 3%.

While an ongoing global chip shortage cost Ford market share in North America, Europe and China, higher prices on more profitable models such as large pickups and SUVs helped increase revenue and operating profit in North America, its largest market.

With its focus on higher-margin products, Ford boosted revenue by nearly $5,000 per vehicle in the quarter, adding $1.5 billion to its operating profit.

Ford is “poised for a big comeback in the near future once it starts to replenish its chip supply for the F-series and can make good on the rollout of some of its highly anticipated vehicles” including the F-150 Lightning, the Bronco and the Maverick, said Edmunds auto analyst Jessica Caldwell.

Ford Chief Executive Jim Farley told analysts on Wednesday that the company was “seeing signs of improvement in the flow of chips now in the third quarter, but the situation remains fluid.”

Farley said Ford has begun engaging more directly with chip manufacturers and providing longer-term forecasts to its key suppliers. In addition, the company is stockpiling critical parts such as semiconductors, while dual-sourcing some and designing more interchangeability in others.

Ford raised its full-year operating profit estimate by about $3.5 billion, to between $9 billion and $10 billion.

Its shares rose as high as $14.34 after U.S. markets closed.

Ford estimated a roughly 30% increase in global sales to its dealers from the first to the second half of the year. However, higher commodity costs, investments in the company’s “Ford+” plan and lower earnings by Ford Credit is expected to reduce operating profit in the second half, it added.

The company reported an operating profit of $1.1 billion, and boosted its full-year forecast for adjusted earnings before interest and taxes to between $9 billion and $10 billion.

Net income dropped to $561 million from $1.1 billion in the year-ago quarter. Revenue climbed to $26.8 billion from $19.4 billion over the same period.

Ford lost ground in most of its major markets. In North America, its share dropped 3.8 points to 10.4%, and in Europe it fell 1 point to 6.1%. China was down a fraction to 2.3%, while South America slid 4.2 points to 2.3%.

Automotive revenue in North America jumped 37% to $15 billion. Revenue in Europe climbed 55% to $5.6 billion, but fell 31% to $600 million in China.

Ford suffered operating losses in most major markets, except North America, where earnings before interest and taxes totaled $194 million, reversing a loss from the previous year.

The company lost about 700,000 units of production in the quarter, as expected, but remains optimistic about the second half.

“We’re spring-loaded for growth,” Ford Chief Financial Officer John Lawler told reporters on a conference call.

He cited a healthy bank of orders for recently introduced models such as the Mustang Mach-E and Bronco, and upcoming launches including the F-150 Lightning and Maverick compact pickup.

Ford estimated full-year adjusted free cash flow of between $4 billion and $5 billion.

Some of that money could be directed toward acquisitions, said Lawler, noting opportunities in electric vehicles, batteries and connectivity.

(Reporting by Ben Klayman and Paul Lienert in Detroit; Editing by Leslie Adler and Richard Chang)





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