Ford (NYSE: F) was 6% higher following its much better than expected Q3 earnings report and added to these gains in ensuing sessions. Some highlights included topping earnings expectations by more than 100%. Management also issued positive commentary about the chip situation getting better and potentially resolving itself sometime in 2023. Ford also increased its guidance for the full year.
Inside the Numbers
In Q3, Ford reported $0.51 per share, topping expectations of $0.27 cents per share. In the same quarter last year, Ford reported a loss of $0.09 per share. Revenue also topped expectations at $33.21 billion vs. expectations of $32.54. This was a decline from last year's $34.7 billion in revenue.
The company also said it would be reinstating its dividend starting in Q4 after suspending it for 18 months during the pandemic. Another bullish development was the company increased its full-year earnings guidance to between $10.5 billion and $11.5 billion vs its previous range of $9 billion to $10 billion.
The company anticipates higher shipments in Q4 in addition to strong pricing power. It also said there was strong demand for new products like the Bronco SUV and Mustang Mach-E, which could reach 200,000 sales per year.
Overall, the company sees a 10% increase in volumes in 2022 with another increase expected in 2023. They also anticipate higher commodity costs by up to $1.5 billion in 2022.
Ford also announced that it would be delaying the rollout of its BlueCruise hands-free highway driving system until the first quarter of next year. The delay is to simplify the technology and is seen as Ford's attempt to keep up in terms of autonomous driving with rivals like GM (NYSE: GM) and Tesla (NASDAQ: TSLA).
Stock Price Outlook
Ford's stock is attractive from many perspectives. For one, there is tremendous pent-up desire to buy new cars which are clearly signalled by rising used car prices. Next, the company has been hampered by supply chain issues and the chip shortage. With economies returning to normal, these issues should abate, turning this headwind into a tailwind.
The stock is also attractive from a valuation perspective with a forward P/E of 9.4. The company is expected to generate about $5 billion in free cash flow which is quite impressive given its market cap of $70 billion. It also pays an above-average dividend of 2.2%.