Ford: Surprise Profits, Now What?

Ford’s (NYSE:F) surprise 13-cent non-GAAP earnings a share is a welcome surprise. Compared to last year, revenue is up by 45.1% Y/Y to $24.12 billion. Ford also raised its outlook for the year.

Though the stock is fully priced in the beat and guidance raise, patient investors should look for a drop before starting a position.

In the second quarter, cash flow from operations topped $756 million. Adjusted free cash flow was negative $5.1 billion. This is due to volume losses from the chip shortage. Adverse working capital and timing differences also led to a negative FCF. Still, Ford has a strong cash position of $25.1 billion.

Ford forecasted adjusted EBITDA of $9 billion to $10 billion. Adjusted free cash flow will be between $4 billion to billion. New models and the launch of many electric vehicles are raising its outlook for the year.

Ford is unlikely to resume its dividend, which is suspended due to the pandemic. It may double down on its EV investments to catch up to Tesla (NASDAQ:TSLA). Ford does not need to attract income investors as it targets growth markets. And with the pandemic potentially behind, consumer demand for Ford’s gas-powered vehicles like the Raptor, F-150, and Lincoln may rise monthly from here. Maverick and Bronco are also winners driving future sales higher.

F stock may continue dipping but the long-term prospects are brighter than ever.