On July 30, Ford (NYSE:F) reported strong second-quarter results, in-line with my previous column on F stock. Specifically, at the end of my July 27 column, I wrote “Ford’s relatively strong Q2 U.S. sales data indicate that it will likely report favorable Q2 results, while its Q3 guidance and its longer-term performance should be boosted by favorable macro trends.”
Ford did indeed deliver great Q2 results, relative to expectations, and provided much better-than-expected Q3 guidance. Further, macro trends that I identified in my previous article were almost certainly among the reasons for Ford’s strong results and guidance. Going forward, I continue to expect Ford and F stock will be boosted by macro drivers, as well as three upcoming vehicles.
In fact, recent data makes me more bullish on the macro outlook for Ford. And after reading recent reviews of its upcoming automobiles, I’m confident that they will boost its financial results and Ford stock over the longer term.
Strong Results and Guidance
Ford reported a Q2 EBIT (earnings before interest and taxes) loss of $1.9 billion versus analysts’ average outlook of a $4.71 billion EBIT loss. More impressively, the company expects positive adjusted Q3 EBIT of $500 million to $1.5 billion. In Q2, Ford’s automotive revenue came in at $16.62 billion, nearly $1 billion above analysts’ average outlook.
I predicted that the abandonment of mass transit during the pandemic would boost car sales, and alluded to that thesis in my previous column on Ford.
Cornell University recently reached the same conclusion. On Aug. 7, Forbes reported “a mass shift to single-occupancy vehicles is occurring nationwide, according to new research from Cornell University.”
Additionally, Ford cited a “favorable pricing environment for products” as a key reason for better-than-expected results. The higher prices were likely driven by higher demand due to the aversion to mass transit I cited in my previous column.
The fact that most Americans with high-paying jobs kept their positions, as I pointed out, also likely helped keep the prices of Ford’s vehicles elevated.
Finally, Ford noted it had done well in Q2 in China. This indicates my optimism about the company’s outlook in that country was warranted.
All of the positive macro trends that I identified should remain intact in coming months. Multiple automakers reported relatively strong U.S. July sales. Hyundai, for example, noted that its SUV sales had jumped tremendously year-over-year. This makes me believe that these macro trends are continuing and strengthening.
Strong Reviews for New Vehicles
The early reviews of Ford’s upcoming new Bronco, Mustang Mach E, and F-150 appear to be largely positive.
For example, last month MotorTrend contended that “The All-New Bronco Has the Goods to Beat the Jeep Wrangler.” Edmunds reportedly called the Bronco, along with Ford’s Bronco Sport, the F-150, and the Mustang Mach-E “vehicles to be excited about.”
Road/Show wrote that “the [Mach E] prototype looks pretty sick” (that was meant as a huge compliment) and praised the vehicle’s ability to “more than” keep pace with “ridiculously capable gas-powered cars.”
Finally, as I reported previously, “CarandDriver stated that ‘upscale models’ of the F-150 would ‘impress the in-laws.'” It added, “We expect some of these half-ton trucks will boast a maximum towing capacity of at least 13,000 pounds.”
Meanwhile, Ford doubled production of the Bronco and stated that reservations for the vehicle were sold out, autoblog reported last month. During the company’s Q2 earnings conference call, officials noted the company sold an impressive 150,000 of the vehicles.
The Bottom Line on F Stock
Macro trends continue to look positive for Ford, and the company’s upcoming vehicles appear to be strong.
With F stock trading at a very low forward price-earning ratio of 6.5 times, long-term investors should buy the shares.
Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been Roku, solar stocks and Snap. You can reach him on StockTwits at @larryramer. As of this writing, Larry Ramer did not own shares of any of the aforementioned companies.
