Ford upgrades guidance as car demand rises

Myles Udland, Brian Sozzi, and Julie Hyman discuss Ford upgrading guidance for the company as it focuses on investing for the future while vehicle demand continues to persist within the industry.

Video transcript

MYLES UDLAND: What is going on in the auto space? Just earlier this week, we saw GM come out and raise its capex guidance. And now Ford out this morning saying that its CEO, Jim Farley, who is set to speak at a Deutsche Bank industry conference today, will upgrade guidance for the second quarter. The company saying that its adjusted EBIT-- so, earnings before interest and taxes, essentially its profits-- will come in better than expected for the second quarter of 2021.

Brian Sozzi, we know that there is a huge amount of demand for cars right now. We see that in the prices for used cars, of which there are not enough right now. But the bullishness with which we see both investors reacting to these announcements from GM and Ford and the speed with which the companies themselves seem to be both kind of forecasting positive results now, and also saying we're investing in a much brighter future tomorrow, it is a cycle that could not be more opposite from how the auto industry came out of the last recession.

BRIAN SOZZI: Yeah, Myles, it's dueling press releases right now between Ford and GM. GM out there yesterday raised their first half operating profit guidance, citing stronger than expected demand. They were able to pull in semiconductors, ultimately, and plug them into their cars and trucks and get them out the door. So that was a good thing. We're seeing some of that language being repeated at Ford here today. Ford noting the improvement in automotive is being driven by lower than anticipated costs and favorable market factors. Pretty much a mirror image to what we heard from GM yesterday.

And here's another fun fact, and I suspect it may surprise some folks right now on the Yahoo Finance platform. Ford shares are up 71% year to date. Tesla stock is down 14% year to date. So if you're looking through the prism of GM and Ford, at least through the prism of the stock market, it's suggesting that Ford and GM are starting to get their acts together in electric cars. And perhaps finally, finally, Tesla is going to have some real rivals it will have to deal with later this year and moving forward.

MYLES UDLAND: Yeah, and look, Tesla has its own cachet and that stock has its own story, and there's a lot of success there for a lot of shareholders over a long time. But moving outside of Tesla-- and I just think of it because we've got Nikola on that board, a real glow up for a company that doesn't really have any products, getting compared to Ford, GM, and Tesla. But the speed with which automakers that had no real products and just concepts of products got billions of assigned to their market value over the last few months, that energy has certainly come out of the market.

And as you note, Sozzi, you can just go back and buy a good old fashioned company like a Ford or a GM, and you're looking at these year-to-date gains in excess of 45% for each. Ford shares up 70% so far just this year. So in a cyclical upturn over the last year-- like many stocks, these two have doubled. Since-- during a cyclical upturn, let's say, you can go back to old boring stuff and still get some decent market returns. At least, that is what the auto sector is telling us.