Legacy auto makers have shown they are not about to lie down and let the EV upstarts ride off into the sunset in their prized battery charged vehicles. Ford (F) is one such industry giant, and investors have been rewarded by the pivot to the electric future with impressive year-to-date share gains of 58%.
There was more good news on Wednesday, when Ford delivered the second quarter’s financials. While the global chip shortage was expected to materially impact performance in the quarter, its effectwas not as sharp as anticipated. In fact, the company turned a surprise profit.
The company reported adjusted earnings of 13 cents per share, based on total revenue of $26.8 billion. The Street had expected a 3-cent loss from revenue of $23 billion.
Ford also expected the chip shortage would result in a 50% drop to production rates in the quarter, but in the end, there was only a 17% drop.
In a sign that the semi-shortage impact should start to moderate, the company anticipates volumes will grow by 30% from 1H to 2H.
As a result, Ford raised its adj EBIT FY guidance from $5.5-6.5 billion to $9-10 billion.
The strong display impressed Wells Fargo’s Colin Langan, and to “reflect the Q2 beat & higher margins,” the analyst raised his 2021 EPS estimate from $1.20 to $1.60. Ford also plans to modernize its sales strategy with a bigger focus on online sales and less inventory. It all suggests to Langan that the “long awaited turnaround plan” is taking shape.
“We continue to see numerous catalysts including production recovery as semi capacity comes back, further updates on Argo AI and its mobility strategy, expected restructuring actions ($2.2-2.7bn of added actions by year-end), and new product launches,” the analyst said. “The recently revealed Ford Lightning already has 120k orders with 75% of customers new to Ford.”
Accordingly, Langan reiterated an Overweight (i.e., Buy) rating for the shares, backed by an $18 price target. The implication for investors? Upside of ~30%. (To watch Langan’s track record, click here)
The Street, overall, has a more modest price target, and at $15.79, the figure suggests one-year gains of 18%. The analyst consensus rates the stock a Moderate Buy based on 8 Buys, 4 Holds and 1 Sell. (See Ford stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
