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Why Is Ford Motor Company (F) Up 7.9% Since Last Earnings Report?

It has been about 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 leading up to its next earnings release, or is Ford Motor Company due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Ford Q3 Earnings Decline, Revenues Up Y/Y

Ford reported adjusted earnings of 30 cents per share in third-quarter 2022, missing the Zacks Consensus Estimate of 31 cents. Lower-than-expected profits in its North America segment and plummeting revenues and a widening pretax loss in the China unit led to this downslide.  The bottom line declined 41.2% from the year-ago quarter’s earnings of 51 cents. The company’s consolidated third-quarter revenues came in at $39.4 billion, rising 10% year over year.

Segmental Performance

In the third quarter, the total wholesale volume in the Ford Automotive 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 increased 12% to $37.2 billion but lagged the Zacks Consensus Estimate of $38.6 billion. Earnings before interest and taxes came in at $1,698 million, declining from the year-ago 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 fell short of the consensus metric of $27.6 billion. The wholesale volume rose 4% to 568,000 units but lagged the consensus metric of 627,000 units. EBIT totaled $1,309 million, a decrease 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 moved up 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 the consensus mark of 27,510 units. The unit’s pretax earnings came in at $149 million, increasing massively from $2 million in the prior-year quarter benefiting from restructuring efforts. It also crossed 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 increased 25% to 273,000 units and beat the consensus mark of 252,000 units. Pretax earnings for the segment totaled $204 million, reversing from the year-ago loss of $52 million. The EBIT far exceeded the consensus mark of $11.4 million.

In China, revenues nosedived 27% year over year to $0.4 billion in the reported quarter and lagged 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. The pretax loss widened from the prior year’s loss of $39 million to $193 million. The loss was wider than the consensus mark of a loss of $64 million.

In the International Markets Group, revenues soared 47% from the year-ago figure to $2.8 billion and topped the consensus mark of $2.63 billion. Wholesale volume rose 30% to 86,000 units but lagged the consensus metric of 88,000 units. Pretax earnings totaled $229 million, rising from $125 million reported in the year-ago period and crossing the consensus metric of $113 million.

Third-quarter revenues from the Ford Credit unit came in at $2,187 million, 10% lower than the year-ago revenues of $2,434 million and missing the Zacks Consensus Estimate of $2,314 million. Pretax earnings totaled $599 million, falling from $1,077 million in the year-ago quarter and lagging the consensus mark of $770 million.

Revenues from Ford Mobility came in at $11 million, steeply declining from the year-earlier level of $38 million and grossly missing the consensus estimate of $58 million.

Financial Position

Ford reported adjusted free cash flow (FCF) of $3,601 million during the quarter. It had cash and cash equivalents of $21.5 billion as of Sep 30, 2022, compared with $20.5 billion on Dec 31, 2021. The automotive long-term debt increased to $19,073 million from $17,200 million as of the end of 2021. Riding on its financial strength, Ford announced a dividend of 15 cents per share. The dividend is payable on Dec 1 to shareholders of record at the close of business on Nov 15. Ford is resuming a modest share repurchase program to offset the dilutive effect of stock-based compensation and approved the repurchase of up to 35 million shares over time for that cause.

Guidance

Ford’s 2022 projections have been revised. Adjusted EBIT for 2022 is now estimated to be around $11.5 billion instead of the prior guided range of $11.5-$12.5 billion. Adjusted FCF is envisioned 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 growth of 10% to 15% in vehicle wholesale volumes for 2022 remains the same. However, it anticipates headwinds from commodity prices and other inflationary costs to the tune of $9 billion for 2022.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

At this time, Ford Motor Company has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Ford Motor Company has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in 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 compares with $1.52 a year ago.

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 last 30 days, the Zacks Consensus Estimate has changed -3.4%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for General Motors Company. Also, the stock has a VGM Score of B.

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