Ford shares jump as auto giant affirms outlook, raises dividend after second-quarter earnings crush

Ford (F) reaffirmed its 2022 outlook and raised the dividend on Ford shares late Wednesday after beating second-quarter earnings estimates. Ford shares rose on Thursday.

Strong demand for traditional combustion and new electric vehicles offset supply and inflation headwinds, the automaker said.


“We are moving with purpose and speed into the most promising period of growth in Ford’s history,” Ford CEO Jim Farley said in an earnings release Wednesday afternoon.

Ford’s earnings follow another move by the Federal Reserve on Wednesday to control inflation. The Fed raised interest rates by another 0.75%, which could make car loans, credit cards and home mortgages more expensive.

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Ford earns more than fivefold

On Wednesday afternoon, Ford revealed that second-quarter earnings rose 423% to 68 cents. Revenue rose 50% to $40.19 billion, driven by “a 35% increase in wholesale shipments along with favorable pricing and vehicle mix.”

Wall Street expected Ford’s earnings to rise 244% year over year to 45 cents, according to FactSet. Total revenue was seen to grow 38% to $36.871 billion.

In the second quarter, the automaker generated free cash flow of $3.6 billion. It will increase Ford’s quarterly dividend to 15 cents a share, up from 10 cents.

Ford also saw a loss in market value Rivian (RIVN) stake

Ford ended the quarter with $29 billion in cash and $45 billion to fund its electric vehicles and other growth initiatives. Ford’s new dividend will be paid on September 1 to shareholders of record after August 11.

The lack of supply rather than demand is hurting car sales in general. But Ford’s second-quarter U.S. sales rose 1.8 percent, defying a double-digit industry decline. Sales fell 22% in China, amid a resurgence of Covid in the country and ongoing global supply chain disruptions.

On Wednesday, Ford maintained 2022 guidance for adjusted EBIT of $11.5 billion to $12.5 billion, up 15%-25% from 2021. It continues to forecast adjusted free cash flow of $5.5 billion dollars to $6.5 billion. Analysts polled by FactSet forecast Ford earnings of $1.92 per share for all of 2022, up 21% from last year.

Ford’s outlook assumes 10% to 15% growth in vehicle sales and continued strong pricing, offset by $4 billion in raw material price headwinds. Ford now expects cost pressures totaling about $3 billion for the year, up $1 billion from a quarter ago.

Ford Stock Pop in high volume

Ford shares rose 6.1% to 13.99 on heavy volume in the stock market today, closing in the upper half of the day’s range. The stock retook the 50-day moving average on July 19 for the first time since January and remains above that key level.

GM shares rose 2.9% to 35.70 on Thursday. On Wednesday, GM missed second-quarter earnings views but also maintained guidance for 2022. Ford’s archrival said it expects “much” higher production and deliveries in the second half. Tesla shares rose 2.2%, extending their rally after beating the second quarter last week.

Ford stock’s relative strength line is improving after a dip. It rebounded strongly in the second half of 2021. A rising RS line means the stock is outperforming the S&P 500.

Both GM and Ford shares have nearly halved from their January peaks. They remain well below their 200-day moving average.

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Radical and risky EV change

About a week ago, Ford announced a series of battery sourcing moves to reach its ambitious goal of 600,000 electric vehicles a year by 2023 and more than 2 million electric vehicles a year by 2026.

General Motors (GM) made similar announcements on Tuesday. Auto giants are trying to convince investors that they have the batteries they need to produce several million electric vehicles each year.

But Tesla (TSLA) continues to lead by a mile.

By 2030, US auto giants Ford, GM and stellar (STLA) all aim for half of their sales to be electric cars, in a bold and risky shift away from traditional gas and diesel vehicles.

Stellantis, the former Fiat Chrysler, posted record first-half profits on Thursday.

Ford’s new Lightning and Mach-E electric vehicles are doing well in the market. But competition is increasing, with GM preparing to launch at least three new electric vehicles by 2023, growing its electric vehicle lineup that includes the Hummer truck and the Cadillac Lyriq SUV. EV power on Rivian (RIVN), in which Ford still has a stake after the stock sale, has a new electric SUV due later this year.

But his switch to electric vehicles comes at a difficult time. Automakers face multiple headwinds, from supply disruptions and material inflation to the specter of a U.S. and global recession.

In a cautionary sign fueled by uncertainty, General Motors will delay hiring, joining tech giants making such a move, it said Tuesday.


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About the Author: Chaz Cutler

My name is Chasity. I love to follow the stock market and financial news!