So far Ford Motor (F) is meeting the expectations I had when I added it to the Jubak Picks Portfolio on June 9, 2021.
On Wednesday, October 27, the company raised its earnings forecast (EBITDA) for 2121 to $10.5 billion to $11.5 billion on an improved supply of chips, and strong demand for its cars, especially for the electric versions of its Mustang and F150 pickup. The company also reinstated a quarterly dividend–at 10 cents a share–payable on December 1. The company had suspended its dividend in March 2020 at the start of the Pandemic. (Restoring the dividend is an important plus for the stock since many money managers are prohibited by their charters from buying stocks that don’t pay a dividend.)
The shares, down 2.70% in regular hours gained 8.70% in after hours trading on the news.
CEO Jim Farley said that the company has annual demand for 200,000 electric Mustang Mach-E cars and is beginning to build the Mustang in China on top of production in Mexico. By the mid-2020s Ford will have the capacity to build more than 1 million electric vehicles a year, Farley said, “and I think we’ll need more.”
Ford’s relatively positive view on the chip shortage–“relatively” since the company said it sees the chip shortage easing but continuing into late 2023 with Ford’s factories not able to run at full production until the end of 2022–was roughly similar to the projection from General Motors (GM) today, that it would see a chip shortage that hindered production lingering well into 2022. The similarity in views on the chip shortage was overshadowed for investors by Ford’s ability to increase dealer inventory in September and to become the top seller in the United States in September, beating General Motors to grab 11.7% of the U.S. auto market in the third quarter. That was up from 10.6% in the second quarter.
Earnings excluding some items came in at 51 cents for the quarter, crushing Wall Street estimates of 27 cents a share. Revenue was $35.7 billion, compared with projections of $31.6 billion. The results marked the sixth consecutive quarter Ford has beaten analysts’ estimates.
On the news I’m raising my target price on Ford to $22 a share from the current $21.