Ford Soars After Lifting 2021 Profit View, Resuming Dividend5 min read

(Bloomberg) — Ford Motor Co., charging forward with big investments in electric vehicles, raised its full-year profit forecast and said it will restore its dividend, sending the stock soaring by as much as 9.5%.

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

Ford attributed the strong results to a let-up in the critical shortage of semiconductors, a problem still haunting most automakers, along with strong demand for its vehicles. Ford has amassed the largest inventory of vehicles in the industry and boosted average selling prices by 13% to $51,460, according to researcher Edmunds.com.

“We’re fully invested in this future and we’re taking big swings,” Chief Executive Officer Jim Farley said of the company’s growth plans on a call with analysts. “We’re moving aggressively to lead the electric vehicle revolution.”

Farley said the company has annual demand for 200,000 electric Mustang Mach-E models and is moving quickly to boost output of EVs. The automaker is beginning to build the Mach-E in China, augmenting production in Mexico.

By the mid-2020s, Ford will have factory capacity “to build more than 1 million battery electric vehicles a year and I think we’ll need more,” Farley said.

While Ford sees the chip shortage easing, Chief Financial Officer John Lawler told reporters it could still extend into 2023. Ford’s factories won’t run at full tilt until the end of next year, he said.

“We seeing about 10%” sales growth in 2021, Lawler said. “And we see that the chip constraint will still hit us.”

Third-quarter profit came to 51 cents a share excluding some items, beating 27-cent average of analysts’ estimates, the automaker said. Revenue amounted to $35.7 billion, compared with projections of $31.6 billion. The results marked the sixth consecutive quarter Ford has beaten analysts’ estimates, according to Dan Levy, an analyst with Credit Suisse.

Shares Rise

Ford shares rose as high as $16.99 in extended trading after closing at $15.51. The stock has more than doubled since Farley became chief executive officer a year ago.

Read more: GM falls as Barra sees chip shortage lasting into 2022

Earlier Wednesday, General Motors Co. beat third-quarter estimates but spooked investors by signaling the chip shortage that has held back vehicle production may linger well into 2022.

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

That helped the company become the top seller in the U.S. in September, surpassing GM, and grabbing 11.7% of the American auto market in the quarter, up from 10.6% in the second quarter, according to Edmunds.

Ford’s finance arm, Ford Credit, and its North American operations continued to drive earnings results.

Ford Credit

Ford Credit posted earnings of $1.1 billion before interest and taxes, unchanged from a year earlier. The lending unit has benefited from record used car prices driven by shortages 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% on that basis so far this year. The puts the automaker ahead of a goal to hit a 10% in North America by 2023. Results in its home market stood out from losses in other regions, though the carmaker managed to eke out a profit in South America for the first time in eight years.

  • In North America, Ford earned $2.42 billion before interest and taxes, down from $3.2 billion in last year’s third quarter. U.S. vehicle sales fell 27% in the quarter on the chip crisis, but that was less than the 33% decline GM experienced.

  • In Europe, Ford posted a loss of $52 million before interest and taxes, compared with a loss of about $440 million last year. Vehicle sales in the 20 key European markets fell 35% from the previous year.

  • In China, Ford had a loss of $39 million before interest and taxes, narrower than the loss 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 certain parts of the country.

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

Farley has won over investors by moving quickly to close money-losing factories in Brazil and India, while boosting investment in electric vehicles by a third to $30 billion through 2025. Ford promises to have 40% to 50% of its global sales volume fully electric by 2030.

The automaker revealed plans last month to spend $11.4 billion with South Korea’s SK Innovation to build four factories in Tennessee and Kentucky to manufacture batteries and electric F-Series trucks. Morgan Stanley says Ford’s Mustang Mach-E, launched a year ago, has become the top selling electric car not named Tesla.

The CEO topped that off by poaching the head of Apple Inc.’s top-secret car project, Doug Field, last month to run Ford’s advanced technology efforts.

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

(Updates shares in 10th paragraph.)

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