Ford (NYSE: F) shares were 14% higher following the company beating analysts' expectations on the top and bottom lines. Shares are up now nearly 30% from their early October low. From a technical perspective, it's possible that there may be a double bottom as the stock has found support at the $11 level in early October and mid-June, while the broader market made lower lows between both time periods.
Overall, Ford shares are down 32% YTD. Its recent bout of strength has been interesting as it's coincided with weakness in terms of economic data and rising recession risk. The stock has certainly become cheap with a forward P/E of 8 and a 4.3% dividend yield. However, its near-term prospects are likely to be determined by whether inflation can decline without triggering a deep recession.
Inside the Numbers
In Q3, Ford reported adjusted earnings per share of $0.30 which topped expectations of $0.27 per share. Revenue also exceeded expectations at $37.2 billion vs $36.3 billion. This was a 10% increase from last year, while adjusted earnings were down 40%. Overall, the company had an unadjusted loss of $827 million during the quarter due to the write-off of its Argo AI autonomous vehicle unit and supply chain issues which led to less production than expected.
The market is also paying close attention to automakers to get a read on whether consumer demand is starting to ebb which would increase the odds of a recession. However, so far, demand has remained strong likely buoyed by large amounts of consumer savings that were built up during the pandemic and abetted by the stimulus.
Ford also slightly decreased its guidance for the full year as it sees adjusted EBITDA of $11.5 billion while it previously saw $12 billion. However, the company did increase its guidance for adjusted free cash flow to $9.7 billion from its previous $6 billion due to the resilience of automotive sales.
Argo AI was a joint venture with Volkswagen. The company is taking a $2.7 billion write-off on its stake and is pivoting to its BlueCruise hands-free system. Ford doesn't believe that fully autonomous vehicles are going to be viable for many years and that it doesn't have to build the technology itself.