Ford Motor Co. (F) - Get Ford Motor Company Report shares jumped higher Thursday after the carmaker lifted its 2021 forecast following a surprise second quarter profit that defied supply constraints linked to the global semiconductor shortage.
Ford said adjusted earnings for the full year would come in between $9 billion and $10 billion, a massive boost from its prior forecast of around $5.5 billion, and said sales could rise as much as 30% compared to first half volumes.
The company also lifted its target for full-year adjusted free cash flow to between $4 billion and $5 billion, due to expected favorable second-half working capital as vehicle production increases with anticipated improvement in availability of semiconductors.
For the three months ending in June, Ford posted adjusted earnings of 13 cents a share on revenues of $26.8 billion, well ahead of the Street consensus of a 3 cents per share loss.
"After effectively managing through the first half, we are now spring-loaded for growth in the second half and beyond because of those red-hot products, pent-up demand, and improving chip supply," CEO Jim Farley told investors on a conference call late Wednesday. "Navigating these chip constraints has led us to make important permanent changes in our business model at Ford. We are modernizing our go-to-market strategy ... placing a greater emphasis on build-to-order sales bank, not just low stocks."
"The demand for our first round of high-volume EVs clearly has exceeded our most optimistic projections," he added. "The reservations for the F-150 Lightning have now climbed well past 120,000 units, and 75% of those customers are new to Ford. We are now working around the clock to break constraints and increase our manufacturing capacity for these red-hot, new battery electric vehicles."
Ford shares were marked 6% higher in pre-market trading Thursday to indicate an opening bell price of $14.70 each, a move that would extend the stock's year-to-date gain to around 67%.
"While some might look at the second half guide of $3 billion to $4 billion (Ford's assessment of favorable market tailwinds) and extrapolate that as a run-rate into 2022, we’d flag that there is likely upside vs. this pace – as reflected in our ’22 estimate of $11 billion," said Credit Suisse analyst Dan Levy, who carries neutral rating with a $15 price target on Ford.
"Specifically, the largest upside will come from volume as the chip shortage eases further and inventory rebuild commences," he added. "While we see a long path ahead in Ford’s transition to an EV world (underlying our Neutral rating), we nevertheless believe Ford is increasingly demonstrating it is on the right track, with increased confidence in the final outlook and its EV transition strategy."