Ford Motor Co. expects adjusted pre-tax second quarter earnings to not only exceed last year’s but also come in “significantly better” than what had been forecast originally.
There is an asterisk to the announcement, however. Net income actually will be “substantially lower” than during the April-June quarter in 2020 due to a $3.5 billion gain last year linked to Ford’s investment in Argo AI. The company reported a $1.1 billion net profit for the period.
“The improvement in automotive is being driven by lower-than-anticipated costs and favorable market factors,” Ford said in a statement. “Additionally, higher vehicle auction values are benefiting Ford Credit.”
Upturn comes despite chip shortages
The strong performance Ford now anticipates comes as a surprise to many industry analysts in light of the problems the carmaker — like the rest of the auto industry — is experiencing with shortage of semiconductor chips.
The automaker lost about 17% of its planned production during the first quarter of the year and has warned that it expects to lose about 50% during the second quarter. That includes some of its most profitable vehicle lines, including its F-Series pickups.
The automaker last updated its earnings expectations in April when it offered full-year guidance of $5.5 billion to $6.5 billion in adjusted pre-tax profits. The semiconductor shortages were expected to have a negative impact of about $2.5 billion.
CEO Farley to offer more insight
Ford CEO Jim Farley is expected to offer further details during a presentation at the Deutsche Bank Global Auto Industry Conference later today.
Farley is expected to report that Ford is seeing improvements in its automotive business, despite the chip shortages. Analysts and investors worried about the company’s ongoing performance after watching retail sales tumble sharply last month, even while competitors like General Motors and Toyota posted substantial gains. The decline largely reflected limited dealer inventories.
Nonetheless, Farley tried to put a good spin on things in Thursday’s announcement, stating that, “We’re providing customers with great value today and there’s much more on the way, because we’re executing Ford+ from strength — with iconic nameplates and leading positions with retail and commercial customers around the world, and the best financing company in our industry in Ford Credit.”
Strong reception for new products
There have been positive signs for the months ahead, including the strong, advance reception Ford is getting for upcoming products like the F-150 Lightning, an all-electric pickup, as well as a hybrid-powered compact pickup, the Maverick. Both models are set to reach showrooms next year. Ford has also generated strong demand with its first long-range battery-electric vehicle, the Mustang Mach-E.
The automaker recently announced plans to increase spending on EVs and autonomous vehicles to $30 billion by 2025.
Ford shares have risen sharply in recent months from a 52-week low of $5.74. They were up again following the automaker’s earnings announcement Thursday morning, hovering above the $15 mark.
The automaker’s upbeat earnings projection came a day after crosstown rival General Motors said that its EBIT-adjusted second-quarter earnings will likely come in between $8.5 billion and $9.5 billion. The largest domestic manufacturer original had forecast a figure of $5.5 billion for the period.