Ford Surprises Wall Street with Strong Earnings and Outlook

Ford Motor, the second-largest U.S. automaker, reported better-than-expected earnings and revenue for the fourth quarter of 2023, as well as a bullish guidance for 2024. The company said it benefited from cost-cutting measures, strong demand for its commercial vehicles, and improved performance in China. Ford also announced plans to invest more in electric and autonomous vehicles, as part of its long-term turnaround strategy.

Ford posted a net income of $1.7 billion, or 42 cents per share, for the fourth quarter of 2023, compared to a loss of $1.9 billion, or 50 cents per share, a year earlier. The results beat the analysts’ average estimate of 34 cents per share, according to Refinitiv.

The company’s revenue also rose 5% year-over-year to $41.8 billion, surpassing the consensus forecast of $40.3 billion. Ford said it saw higher sales volumes and prices across all regions, especially in North America, where it gained market share and increased its average transaction price by $1,600 per vehicle.

Ford’s earnings before interest and taxes (EBIT) margin improved to 7.7% in the fourth quarter, up from 4.1% a year ago. The company attributed the improvement to its restructuring efforts, which reduced its costs by $2.6 billion in 2023. Ford also said it generated $3.4 billion of free cash flow in the quarter, ending the year with $31 billion of cash and $47 billion of liquidity.

Ford Raises Outlook for 2024, Despite Chip Shortage

Ford also provided a positive outlook for 2024, despite the ongoing global shortage of semiconductor chips that has disrupted the auto industry. The company said it expects to earn between $8 billion and $9 billion in adjusted EBIT, and between $3.5 billion and $4.5 billion in adjusted free cash flow, for the full year. The guidance was higher than the analysts’ average expectations of $7.3 billion in EBIT and $3.3 billion in free cash flow, according to Refinitiv.

Ford said it expects the chip shortage to reduce its vehicle production by 10% to 20% in the first quarter of 2024, and by about 10% for the full year. However, the company said it is working with its suppliers to mitigate the impact and prioritize the production of its most profitable and in-demand vehicles, such as the F-150 pickup truck, the Bronco SUV, and the Mustang Mach-E electric crossover.

Ford also said it plans to increase its investment in electric and autonomous vehicles, as part of its long-term vision to become a leader in the future of mobility. The company said it will spend more than $22 billion on electrification and more than $7 billion on self-driving technology through 2025, up from its previous commitments of $11.5 billion and $4 billion, respectively.

Ford Sees Growth Opportunities in China and Commercial Vehicles

Ford also highlighted its growth opportunities in China and the commercial vehicle segment, where it has made significant progress in 2023. The company said it returned to profitability in China for the first time since 2016, as it revamped its product portfolio, improved its quality and customer satisfaction, and reduced its costs and dealer inventories. Ford said it sold 602,627 vehicles in China in 2023, up 6% from 2019, and increased its market share by 0.3 percentage points to 2.3%.

Ford also said it strengthened its position as the leader in the U.S. commercial vehicle market, where it has a 43% share. The company said it sold more than 1.2 million commercial vehicles globally in 2023, up 12% from 2019, and generated more than $27 billion in revenue, up 24% from 2019. Ford said it expects to grow its commercial vehicle business further, as it launches new products and services, such as the E-Transit electric van, the F-150 hybrid and electric versions, and the Ford Pro platform for fleet customers.

Ford Shares Rally on Strong Results and Outlook

Ford’s strong results and outlook were well received by Wall Street, as the company’s shares rallied more than 10% in after-hours trading on Tuesday. The stock closed at $11.53 per share, up 75% from a year ago, and reached a 52-week high of $12.81 per share in extended trading.

Analysts praised Ford’s performance and praised its CEO Jim Farley, who took over the helm in October 2020, for leading the company’s turnaround. They also expressed optimism about Ford’s prospects in the electric and autonomous vehicle markets, where it faces fierce competition from rivals such as Tesla, General Motors, and Volkswagen.

“Ford is firing on all cylinders and we believe the company’s stock has a lot more room to run,” said Dan Ives, an analyst at Wedbush Securities, who raised his price target on Ford from $14 to $16 per share. “The company’s electric vehicle strategy and execution are starting to pay off, as Ford is emerging as a major force in this green tidal wave.”

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