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🚗 Is Ford’s Dividend Such A Big Deal?
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🚗 Ford: Is Dividend Such A Big Deal?
Ford Motor Co. (F) beat analyst expectations in Q3 and increased annual guidance for the second time this year. Its topline was also higher than that of arch-rival General Motors Co. (GM). The company also resumed its quarterly dividend payment and has made its investors a happy bunch! (Tweet This)
All Is Well
Ford’s CFO, John Lawler, had expected the second half of 2021 to be more challenging than the first six months of the year. His rationale: higher commodity costs, lower earnings from Ford Credit, and $500M in higher warranty costs. As a pleasant surprise, none of Lawler’s predictions came to pass.
Key Stats From Q3:
Automotive Revenue: $33.2B Vs. $32.5B expected
Total Revenue: $35.7B Vs. $36.6B expected
Units sold: 546K Vs. 568.5K expected (in North America)
EPS: $0.51 Vs. $0.27 expected
So what gives? Strong demand for newer products like the Bronco SUV and the all-electric Mustang Mach-E SUV, which the company expects to clock over 200K units in sales globally in a year.
For the full year, Ford now expects adjusted earnings of ~$11B, up from the previous projection of ~$9.5B. For Q4, the company expects an increase in shipments to dealers compared to Q3 while also benefiting from an increase in the prices of automobiles.
The company will reinstate its regular dividend of $0.10 per share starting Q4, which it had suspended at the onset of the pandemic last year. Ford had invested in EV startup Rivian, from which it will be receiving a $900M windfall. Rivian is likely to go public by the end of the year.
Cruising or Accelerating?
It's true the investors may have been rejoicing the resumption of the dividend. But that doesn't give the complete picture. The North American region - Ford's largest and most profitable market globally, contributing to over two-thirds of its overall revenue - was down 16.1% in sales Y-o-Y.
The automotive revenue, too, was down 5% Y-o-Y even if it beat analyst expectations. Ford's net income for the quarter, too, was down to $1.8B (Vs. $2.4B Y-o-Y).
By now, readers of this column would be familiar with the problem of global chip shortage. Lawler cited this issue as possibly plaguing Ford into 2023. Commodity costs are likely to be up ~$3.5B by 2021 and may rise another $1.5B in 2022 for the company.
Ford is delaying the rollout of its BlueCruise hands-free highway driving system until the first quarter of next year. Once deployed, the company expects this to be a recurring revenue opportunity as it plays catch up with competitors such as General Motors and Tesla.
Shares of Ford have nearly doubled this year. But is the exuberance justified considering the challenges facing the company? Maybe they've internalized Lawler's tendency to under-promise and over-deliver. So when he says positive things, perhaps the outcome will be even more optimistic than predicted! And then there's the dividend that's coming back.
And thus, it seems shareholders seem to be very much in acceleration mode as far as Ford's stock is concerned!
F ended at $17.08, up 1.3%. Shares have doubled this year.
Company Snapshot 📈
F $17.08 +0.22 (1.30%)
Analyst Ratings (23 Analysts) BUY 57% HOLD 39% SELL 4%
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