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It’s been almost a month since the last earnings report for Ford Motor Company (F). Shares have added about 7.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue until its next earnings release, or should Ford Motor Company pullback? Before we examine how investors and analysts have reacted of late, let’s take a look at its most recent earnings report to better grasp the key drivers.
Ford Q3 Revenues Down, Profits Up Y/Y
Ford reported adjusted earnings of 30 cents per share in the third quarter of 2022, missing the Zacks Consensus Estimate of 31 cents. Lower-than-expected earnings at its North American division and falling profits and a widening pre-tax loss at the China unit led to this fall. The bottom line declined 41.2% from last quarter’s earnings of 51 cents. The company’s consolidated revenue in the third quarter reached $39.4 billion, up 10% year over year.
Segmental Performance
In the third quarter, the total volume of wholesale in Ford Automotive the segment increased 7% year-over-year to 1,086,000 units but missed the consensus metric of 1,132,000 units. Revenues from the segment rose 12% to $37.2 billion but missed the Zacks Consensus Estimate of $38.6 billion. Earnings before interest and taxes came in at $1,698 million, down from last year’s EBIT of $2,459 million and missing the consensus metric of $2,111 million.
In North America, revenues grew 10% year over year to $26.3 billion in the reported quarter but missed the consensus metric of $27.6 billion. Wholesale volume rose 4% to 568,000 units but missed the consensus metric of 627,000 units. EBIT came in at $1,309 million, a drop from $2,423 million in the corresponding quarter of 2021. The figure also missed the consensus mark of $1,955 million.
In South America, revenues rose 41% year over year to $0.9 billion in the quarter and topped the consensus mark of $0.87 billion. Wholesale volume increased 17% to 23,000 units. The figure, however, lagged behind the consensus mark of 27,510 units. The unit’s pretax earnings came in at $149 million, up significantly from $2 million in the prior-year quarter benefiting from restructuring efforts. It also surpassed the consensus mark of $96 million.
In Europe, revenues jumped 11% year over year to $6.8 billion in the quarter and crossed the consensus mark of $6.52 billion. Wholesale volume rose 25% to 273,000 units and beat the consensus mark of 252,000 units. Pretax earnings for the segment came in at $204 million, reversing a year-ago loss of $52 million. EBIT significantly exceeded the consensus mark of $11.4 million.
In China, revenues fell 27% year over year to $0.4 billion in the reported quarter and missed the consensus mark of $0.72 billion. Wholesale volume also fell 16% to 137,000 units and missed the consensus metric of 138,000 units. Pretax loss widened from a year-ago loss of $39 million to $193 million. The loss was wider than the consensus mark of a loss of $64 million.
Naa International Markets Group, revenues rose 47% from a year ago to $2.8 billion and topped the consensus mark of $2.63 billion. Wholesale volume rose 30% to 86,000 units but missed the consensus measure of 88,000 units. Pretax earnings came in at $229 million, up from the $125 million reported last year and beating the consensus estimate of $113 million.
Third quarter earnings from Ford Credit the unit came in at $2,187 million, 10% lower than last year’s revenues of $2,434 million and missing the Zacks Consensus Estimate of $2,314 million. Pretax earnings came in at $599 million, down from $1,077 million in the previous quarter and lagging the consensus mark of $770 million.
Revenues from Ford Mobility came in at $11 million, down slightly from the prior-year level of $38 million and well missing the consensus estimate of $58 million.
Financial position
Ford reported adjusted free cash flow (FCF) of $3,601 million in the quarter. It had cash and cash equivalents of $21.5 billion as of Sept. 30, 2022, compared to $20.5 billion as of Dec. 31, 2021. Automotive long-term debt rose to $19,073 million from $17,200 million at the end of 2021. Riding on its financial strength , Ford announced a dividend of 15 cents per share. The dividend will be paid Dec. 1 to shareholders of record at the close of business on Nov. 15. Ford is continuing a modest share repurchase program to offset the dilutive effect of stock-based compensation and has approved repurchases of up to 35 million shares over time for that reason.
Guidance
Ford’s 2022 projection has been revised. Adjusted EBIT for 2022 is now estimated to be approximately $11.5 billion instead of the previously guided range of $11.5-$12.5 billion. Adjusted FCF is seen in the range of $9.5 billion-$10 billion for 2022, up from the prior range of $5.5-6.5 billion. The company’s assumption of 10% to 15% growth in auto wholesale volumes for 2022 remains the same. However, it expects headwinds from commodity prices and other inflationary costs to be up to $9 billion for 2022.
How Have Forecasts Moved Since Then?
Turns out, review estimates have trended downward over the past month.
VGM Marks
At this time, Ford Motor Company has an average Growth Score of C, though it lags well behind in the Momentum Score with an F. However, the stock has been assigned a grade of A in the value segment. , placing it in the top 20% for this investment strategy.
Overall, the stock has a composite VGM Score of B. If you are not focused on a strategy, this score should interest you.
Outlook
Estimates are broadly trending downward for the stock, and the magnitude of these changes looks promising. Notably, Ford Motor Company has a Zacks Rank #3 (Hold). We expect an in-line return from the stock over the next few months.
Performance of an Industry Player
Ford Motor Company is part of the Zacks Automotive – Domestic industry. Over the past month, General Motors Company (GM), a stock from the same industry, has gained 5.1%. The company reported its results for the quarter ended September 2022 more than a month ago.
General Motors Company reported revenues of $41.89 billion in the last reported quarter, representing a year-over-year change of +56.4%. EPS of $2.25 for the same period compared to $1.52 last year.
General Motors Company is expected to post earnings of $1.59 per share for the current quarter, representing a year-over-year change of +17.8%. Over the past 30 days, the Zacks Consensus Estimate has changed -3.4%.
The overall direction and size of the estimate changes translates into a Zacks Rank #3 (Hold) for General Motors Company. Also, the stock has a VGM Score of B.
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