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Ford Surges to 8-Month High After Margin-Driven Q3 Earnings Beat

Ford's profit margins for the third quarter were the highest in four years as north American demand for pickups and SUVs helped the carmaker smash Wall Street's earnings forecasts.

Ford Motor Co.  (F) - Get Ford Motor Company Report shares surged to an eight-month high Thursday after the carmaker smashed Wall Street forecasts for its third quarter earnings thanks in part to the strongest north American profit margins in four years.

Ford said adjusted earnings for the three months ending in September were pegged at 65 cents per share, nearly double the same period last year and firmly ahead of the Street consensus forecast of 19 cents per share. Revenues, as well, surprised to the upside , rising 10.5% to a forecast-beating $37.5 billion.

Ford also said it expects to see solid gains over the final months of the year, forecasting 2020 adjusted earnings in the range of break-even to a loss of $500 million, thanks in part to continued domestic demand for its higher-margin pickups and SUVs.

"When you look at our results, they reflect the benefit of our decision two years ago to allocate capital to our strongest franchise, namely: pickups, a whole range of utilities across the world, commercial vehicles and iconic passenger vehicles," Ford CEO Jim Farley told investors on a conference call late Wednesday. "Additionally, we saw higher-than-expected demand for our new vehicles in the quarter."

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"At a time when inventories are really low following the virus-related first half factory shutdowns. Now this contributed to a very favorable pricing environment and mix," he added. "Together, these factors, plus the strongest performance from Ford Credit in 15 years, led to a total company adjusted EBIT margin of 9.7%. That's 490 basis points higher than last year."

Ford shares were marked 6.9% higher in early trading Thursday to change hands at $8.24 each, the highest since February 7 and a move that extends the stock's six-month gain to around 55%.

"Ford posted a sharp 3Q beat implying significant upside on 2021 – our revised ’21 EBIT estimate of $8.4bn is solidly ahead of consensus $6.1bn," said Credit Suisse analyst Dan Levy. "Indeed, with NA posting its best quarterly margin in 4 years, and with new product benefits combined with NA market strength, upside exists."

"Moreover, the 3Q print also provided us with insight on new CEO Jim Farley’s strategy, who will focus on improving the biz near-term (cost, execution), as well as reinvigorating growth," he added. "We believe Jim Farley will drive incremental urgency and accountability at Ford, and this could spark incremental investor interest."