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FORD MOTOR COMPANY

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Ford raises 2021 profit outlook, eyes shift to build-to-order

07/28/2021 | 04:19pm EDT
FILE PHOTO: Ford Motor Co. displays a new 2021 Ford F-150 pickup truck at the Rouge Complex in Dearborn, Michigan

DETROIT, July 28 (Reuters) - Ford Motor Co on Wednesday boosted its 2021 profit forecast after reporting better-than-expected quarterly results, lifting the No. 2 U.S. automaker's shares nearly 3%.

While an ongoing global chip shortage cost Ford market share in North America, Europe and China, higher prices on more profitable models such as large pickups and SUVs helped increase revenue and operating profit in North America, its largest market.

Ford Chief Executive Jim Farley said the automaker was intent on shifting away from making vehicles that wind up stockpiled on dealer lots, to building them to customer orders, reducing discounts required to make a sale.

"We are really committed to going to an order-based system and keeping inventories at 50 to 60 days' supply," Farley said.

Detroit automakers have aspired in the past to building vehicles to order and cutting inventories, only to allow inventories to build, requiring more incentives to move them out.

"I know we are wasting money on incentives," Farley said. "I don't know where."

Tight vehicle supplies caused by the chip shortage prompted Ford, like other manufacturers, to focus on higher-margin products. That enabled it to boost revenue by nearly $5,000 per vehicle in the quarter, adding $1.5 billion to its operating profit.

Farley told analysts the company was "seeing signs of improvement in the flow of chips now in the third quarter, but the situation remains fluid."

He said Ford has begun engaging more directly with chip manufacturers and is stockpiling critical parts such as semiconductors, while dual-sourcing some and designing more interchangeability in others.

Ford raised its full-year operating profit estimate by about $3.5 billion, to between $9 billion and $10 billion.

Its shares rose as high as $14.34 after U.S. markets closed.

Ford estimated a roughly 30% increase in global sales to its dealers from the first to the second half of the year. However, higher commodity costs, investments in the company's "Ford+" plan and lower earnings by Ford Credit is expected to reduce operating profit in the second half, it added.

The company reported an operating profit of $1.1 billion, and boosted its full-year forecast for adjusted earnings before interest and taxes to between $9 billion and $10 billion.

Net income dropped to $561 million from $1.1 billion in the year-ago quarter. Revenue climbed to $26.8 billion from $19.4 billion over the same period.

Automotive revenue in North America jumped 37% to $15 billion. Revenue in Europe climbed 55% to $5.6 billion, but fell 31% to $600 million in China.

Ford suffered operating losses in most major markets, except North America, where earnings before interest and taxes totaled $194 million, reversing a loss from the previous year.

The company lost about 700,000 units of production in the quarter, as expected, but remains optimistic about the second half.

"We're spring-loaded for growth," Ford Chief Financial Officer John Lawler told reporters on a conference call.

He cited a healthy bank of orders for recently introduced models such as the Mustang Mach-E and Bronco, and upcoming launches including the F-150 Lightning and Maverick compact pickup.

Ford estimated full-year adjusted free cash flow of between $4 billion and $5 billion.

Some of that money could be directed toward acquisitions, said Lawler, noting opportunities in electric vehicles, batteries and connectivity. (Reporting by Ben Klayman and Paul Lienert in Detroit, additional reporting by Joe White; Editing by Leslie Adler and Richard Chang)


ę Reuters 2021
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Financials (USD)
Sales 2021 128 B - -
Net income 2021 5 010 M - -
Net cash 2021 5 498 M - -
P/E ratio 2021 10,8x
Yield 2021 0,25%
Capitalization 55 048 M 55 048 M -
EV / Sales 2021 0,39x
EV / Sales 2022 0,28x
Nbr of Employees 186 000
Free-Float 98,0%
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Mean consensus OUTPERFORM
Number of Analysts 20
Last Close Price 13,78 $
Average target price 16,08 $
Spread / Average Target 16,7%
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Managers and Directors
James D. Farley President, Chief Executive Officer & Director
John T. Lawler Chief Financial Officer & Vice President
William Clay Ford Executive Chairman
Douglas Field Chief Advanced Technology Officer
Michael R. Amend Chief Digital & Information Officer
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