Ford Motor: Rising from Covid Ashes

Ford reported Q2 results that beat Wall Street’s estimates. A strong car sales report for the month of July helped fuel a gain for Ford (F) shares on Wednesday, August 3. In a sales update posted prior to publication of the financial report, the Michigan-based automaker said that total vehicle sales increased 36.6% YoY, growing to 163.9K units sold in the month. The marked gain was utterly surprising vis-a-vis the broader industry trend that saw overall sales slide 10.5%.

Here are the key numbers:

Adjusted earnings per share: 68 cents, up from 12 cents in Q2 2021. The consensus estimate had expected 45 cents a share. Automotive revenue came in at $37.91 billion, up from $24.13 billion in Q2 of 2021 whereas the market had expected $34.32 billion. Net income stood at $667 million versus $561 million in Q2 of 2021.

Also Ford said that its adjusted earnings before interest and tax, or adjusted EBIT, jumped to $3.7 billion from $1.1 billion a year ago, as its margin improved to 9.3% from 3.9% on supply chain improvements and a more advantageous product mix. But despite that gain, Ford’s net income was just $667 million after it accounted for a $2.4 billion decline in the value of its stake in electric vehicle startup Rivian Automotive.

Ford’s EV sales were a particular outperformer, increasing 168.7% as compared to 2021 with demand for the Lightning 150 remaining robust. SUV sales also surged 70% as compared to the prior year, led by the growing popularity of the Lincoln and Bronco models. Bronco sales increased 227% from 2021 due to a “stronger stock position” as supply chain problems are dealt with. Lincoln sales leapt 68.3% from the prior year.

Ford's total July U.S. sales increased 36.6% YoY to 163,942. The company said electric vehicle sales were also up 168.7%. With Mustang Mach-E up 74.1%, F-150 Lightning delivering its best-month since launch and E-Transit’s dominant share position, Ford surprised by saying the company grew more than 3 times the rate of the overall EV segment in July.

Still, overall sales year to date continue to lag the pace of 2021. As of the close of July, Ford had sold 1.08 million vehicles as compared to 1.12 million in the first seven months of 2021.

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Ford also reiterated its previous guidance for the FY, and said that it will increase its quarterly dividend to 15 cents per share, the amount it paid before the Covid-19 pandemic. CFO John Lawler said that despite inflation headwinds, Ford is standing by its previous guidance for the full year. It still expects adjusted EBIT of $11.5 billion to $12.5 billion for the year, which would represent 15% to 25% growth from last year, with adjusted free cash flow between $5.5 billion and $6.5 billion.