Automakers in terms of vehicle offerings and manufacturing capability. The company’s financial position is also stronger than that of most peers, with cash far exceeding debt and an investment-grade credit rating.
The higher earnings reflected greater-than-expected vehicle demand and favorable pricing and product mix. Revenue rose 1.4% to $37.5 billion, and topped the StreetAccount consensus of $35.7 billion.
In North America, Ford reported third-quarter EBIT of $3.2 billion, reflecting a favorable product mix, higher net pricing on new products, and lower industry incentive spending. Segment revenue increased 8% to $25.3 million.
In Europe, Ford reported a 3Q20 EBIT loss of $0.4 billion. The wider loss reflected lower volume, as 3Q wholesale units fell 20%. Segment revenue fell 10%.
In the South American division, Ford posted an EBIT loss of $0.1 billion, compared to an EBIT loss of $0.2 billion in 3Q19.
The company’s new International Markets Group (IMG), which consolidates the Asia Pacific, Middle East & Africa, and Russia divisions, reported an EBIT profit of $0.1 billion in 3Q20. The narrower loss reflected a 22% increase in wholesale shipments and strong commercial vehicle sales.
Ford Motor Credit reported 3Q20 EBIT of $1.1 billion. The improvement was largely related to strong auction values. Full-year 2020 auction values are now forecast to be up about 2% (versus flat previously), consistent with third-party estimates.
On March 19, 2020, Ford suspended its annual dividend of $0.60 per share and withdrew its 2020 adjusted EPS guidance of $0.94-$1.20 due to the pandemic. It did not reinstate guidance with its 3Q report.
Ford recently announced that it would provide a new vehicle financing program to help boost consumer demand. Through its financing division, Ford will allow customers who buy new vehicles to delay their first payment for six months. Ford will pay for three months and customers can defer for up to three additional months. The program is available only for purchases of 2019 and 2020 model-year vehicles and excludes 2020 Super Duty trucks. Early results have been positive.
The company has also announced a management change.
EARNINGS & GROWTH ANALYSIS
Ford expects full-year 2020 adjusted EBIT of $600 million to $1.1 billion, including fourth-quarter adjusted EBIT between breakeven and a $500 million loss. This guidance assumes no meaningful change in economic conditions, continued improvement in the global automotive supply base, and no significant production or distribution disruptions related to the pandemic.
Reflecting the better-than-expected third-quarter results and our expectations for 1%-2% higher pricing in 4Q. The current consensus calls for a loss of $0.19 per share.
FINANCIAL STRENGTH & DIVIDEND
Ford Motor suspended its dividend on March 19, 2020 due to the pandemic. Ford paid out approximately $2.4 billion in dividends in 2019.
We view Ford shares as fairly valued at current levels based on our 2020 outlook for vehicle sales and the impact of the coronavirus pandemic. We believe that Ford achieved peak cyclical earnings in 2017, and that the near-term earnings trend will be lower.