(Bloomberg)-Ford Motor Co., riding on the momentum of new models and new management, easily achieved expectations, and third-quarter earnings exceeded the economic impact of the coronavirus pandemic. Adjusted earnings per share were 65 cents, much higher than the 19 cents average analysts expected. The huge profits in North America offset the weakness overseas, allowing the company to revise its full-year forecast. Now, it expects to remain profitable this year, which is contrary to the early outlook of the first annual loss in a decade.
Ford Motor’s shares rose 7.8% in after-hours trading after closing at $7.70 on Wednesday. The stock has fallen about 1
Since industry veteran Jim Farley took over as CEO on October 1, the suffering automaker’s sentiments are soaring, replacing the retired Jim Hackett (Jim Hackett). ), Wall Street has never been satisfied with Jim Hackett (Jack Hackett). The strong and demanding requirement is that Farley is expected to quickly start the transformation that has taken place for many years. The latest quarterly results help the company make the worst decision.
Ford said its adjusted profit before interest and taxes this quarter was $3.6 billion, compared with $1.8 billion in the same period last year. Revenue for the quarter was US$37.5 billion, higher than analysts’ expectations of US$33.98 billion.
Farley said that the bullish performance concealed potential problems that need to be resolved before automakers can achieve a sustainable profit margin of more than 10% in the core North American market.
The CEO said in a conference call with analysts: “Despite the strong third quarter data, we know that we have not resolved the issue that brought us back to the automotive business.” “This includes warranty costs, but they are still high. “
Farley said that another challenge for Ford is slow growth, but he expressed optimism that new products will solve this problem. The release of new models includes the redesign of the best-selling F-150 pickup, the electric Mustang Mach-E and the revitalized Bronco sport utility vehicle. Sales in the US market rebounded faster than expected, which also helped the automaker.
Credit Suisse analyst Dan Levy wrote in a research report: “We see opportunities related to Mustang and F-150, and the resilience of the North American market also drives this force.” He said, but it should The company still faces the long-term question of whether it can make a profitable transition to a product lineup focused on electric vehicles.
Farley said that Ford intends to make money on electric vehicles by offering battery-powered best-selling products, including the F-150 and Mustang. He said the automaker will start delivering the first Mustang Mach-E models to customers in the next few weeks.
Farley said: “We don’t want to be one of the many automakers transitioning to electric vehicles.” “We want to lead the electrical revolution.”
Ford Motor set its best third-quarter pickup sales record in 15 years. This is because the entire industry demand for trucks exceeds supply, and the economy is shrinking due to the pandemic stalling. This increased the company’s US market share in the quarter by 1 percentage point to 13.6%. Researcher Edmunds said the average price paid by buyers climbed to $45,599, an increase of 8% over the same period last year.
Chief Financial Officer John Lawler said in a conference call with reporters that Ford now expects adjusted EBIT for the full year of 2020 to be between $600 million and $1.1 billion. This figure is higher than the company’s expected loss in the second quarter.
In order to save cash when the pandemic breaks out, Ford has suspended dividends and capped its revolving credit line to $15.4 billion. Lawler said that the automaker has fully repaid these debts and completed the repayment with $30 billion in cash and $45 billion in cash reserves at the end of the third quarter.
Analysts say that loan repayment may pave the way for the restoration of dividends. But when asked about this question on the phone, Farley said he would answer in the spring.
Evercore ISI analyst Chris McNally captured the shock of Ford’s surprisingly strong performance in a research report titled “Can a quarter be good?” He wrote that they may herald better days. “It’s hard not to be optimistic about the changes that are taking place.”
Dragged down by overseas markets
North America continues to drive Ford’s performance. The auto company’s EBIT was US$3.18 billion, up from US$2.01 billion a year ago, when the company was at the time when the expensive Explorer SUV went public. The region’s operating margin in the third quarter was 12.5%, higher than the 8.6% in the same period last year.
Overseas business is still in progress. Ford Motor Company lost US$58 million in China and its sales increased 25% in the quarter.
In Europe, Ford lost 440 million U.S. dollars because it rushed to fine the Kuga plug-in hybrid to avoid violating environmental regulations after it recalled its Kuga plug-in hybrid for fire hazards.
Lawler said: “If it were not for KUKA, Europe would be profitable in the third quarter.”
He said that in the fourth quarter, the recall and the costs associated with obtaining sufficient credit to comply with the new strict European emission standards will reach US$100 million to US$200 million.
Ford declined to say which other automakers it will join to meet regulations and avoid paying fines.
(Update the comments of the CEO in paragraph 6.)
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