The General Motors world headquarters workplace is seen at Detroit’s Renaissance Center.
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DETROIT – Both Ford Motor and General Motors beat Wall Street’s expectations for the third quarter however shares of GM are flat as Ford’s stock surged to a brand new 52-week excessive throughout buying and selling Thursday morning.
On the floor, outcomes for each automakers had been comparable. They simply beat the earnings consensus from analysts and barely topped income expectations. They additionally each partially raised 2021 steering. But wanting deeper into the outcomes and feedback from executives, Ford made higher progress and painted a extra optimistic outlook than GM, based on analysts.
The outcomes pushed Ford’s shares up by as a lot as 13% to $17.58 a share throughout buying and selling Thursday. That compares with GM’s stock up by as a lot as 2.4% to $55.58 a share. GM’s market cap is about $80 billion in contrast with Ford’s at $66 billion.
The variations between the third-quarter earnings reviews ranged from outlooks on earnings and the continuing scarcity of semiconductor chips to their autonomous automobile companies and stock dividends.
Here’s extra on these subjects and others following the Wednesday earnings outcomes from America’s two largest automakers.
Ford beat Wall Street’s estimates greater than GM did. It additionally reported a smaller decline in internet earnings than a 12 months earlier, when customers flocked to dealerships after the easing of lockdowns and shops reopening after closing because of the coronavirus pandemic.
Ford reported adjusted earnings per share of 51 cents versus 27 cents anticipated primarily based on common analyst estimates compiled by Refinitiv. Its automotive income was $33.21 billion versus expectations of $32.54 billion. Its internet earnings for the quarter was $1.8 billion, down 25% from a 12 months earlier.
GM reported adjusted earnings per share of $1.52 versus 96 cents anticipated from Refinitiv. Its income was $26.78 billion versus $26.51 billion anticipated. Its internet earnings for the quarter was $2.4 billion, down by 40% in contrast with a 12 months earlier.
“Yesterday’s large negative market reaction to GM’s solid 3Q but unchanged 2021 outlook, in our view, reflected some disappointment that GM didn’t boost its guidance amid improving industry conditions, and investor concerns that the soft implied 4Q Ebit represents a low exit rate going into 2022,” Deutsche Bank analyst Emmanuel Rosner wrote Thursday in an investor be aware.
Ford elevated its full-year adjusted earnings steering to between $10.5 billion and $11.5 billion, up from between $9 billion and $10 billion. That compares with GM that maintained its earnings steering of between $11.5 billion and $13.5 billion however raised expectations for earnings per share to $5.70 to $6.70, up from $5.40 to $6.40 a share.
Ford additionally maintained its adjusted free money circulate outlook for the 12 months of between $4 billion and $5 billion, while GM minimize its to about $1 billion, down from $1 billion to $2 billion. The decline is as a result of spending to complete automobiles that had been beforehand constructed with out chips, officers mentioned.
“This is less than what Tesla generated in 3Q alone. While GM FCF is hit hard by working capital this year, one needs to step back and appreciate that 2021 is an historically strong year for the industry in terms of price, mix and cost,” Morgan Stanley analyst Adam Jonas wrote Wednesday in an investor be aware.
Assuming GM delivers fourth-quarter earnings close to the excessive finish of its forecast, that may indicate its earnings earlier than curiosity and taxes, a key efficiency measure, would be round $2 billion as an alternative of the $2.6 billion Wall Street hoped to see, Credit Suisse analyst Dan Levy mentioned Wednesday in an investor be aware.
Levy described Ford’s name in a separate be aware as “the most bullish” from the automaker in a very long time.
Ford’s rosier outlook was instantly tied to semiconductor chips, which have been in brief provide all through this 12 months. The components difficulty has boosted earnings however triggered record-low automobile inventories and automakers to sporadically shutter crops.
Ford’s chip provide within the third quarter significantly improved in contrast with the corporate shedding practically half of its anticipated automobile manufacturing within the second quarter. That compares with GM, which pulled up chip availability from the third quarter to the second quarter. The choices helped second-quarter outcomes, however the automaker mentioned it anticipated to lose about 200,000 wholesale items in North America through the again half of the 12 months in contrast with the primary six months.
Barclays analyst Brian Johnson famous that while Ford’s provide was higher within the third quarter, GM nonetheless leads in revenue margins when you mix the previous two quarters.
“Combining the two quarters, Ford would have a 6.7% EBIT margin while GM would have a 10.6% EBIT margin (pro forma adjusting out all Bolt recall costs and recoveries) – showing that GM is still ahead on execution,” he mentioned Thursday in an investor be aware.
Analysts appear to be extra bullish on Ford’s plans to monetize its Argo AI autonomous automobile enterprise by way of a possible spinoff than GM’s plans – for now – to maintain its Cruise operations in-house.
“Ford appears ready to monetize Argo, while GM stresses vertical integration between Cruise and GM,” Johnson mentioned, calling it a “meaningful catalyst” for Ford.
In its presentation to buyers, Ford famous that executives “fully support Argo AI’s access to public financing.” That compares with GM CEO Mary Barra telling buyers Wednesday that the corporate views vertical integration as “a key differentiator” for its majority-owned subsidiary.
Both Ford and GM suspended their dividends to shore up money final spring because the pandemic shuttered factories and dealerships
Ford on Wednesday mentioned it will reinstate its common dividend beginning within the fourth quarter at 10 cents per share on excellent widespread and Class B stock. The funds will likely be made on Dec. 1 to shareholders as of Nov. 19. The quarterly dividend is anticipated to price about $400 million, based on Ford CFO John Lawler.
GM was mum Wednesday on its reinstatement of the dividend. GM CFO Paul Jacobson earlier this month instructed buyers that the corporate would reinstate the dividend when the market turns into extra secure.
Lawler attributed Ford’s dividend reinstatement to the energy of the corporate’s underlying enterprise. He mentioned Ford is not capital constrained and is assured it may possibly finance an aggressive turnaround plan, which it calls Ford+. The plan consists of investing billions in electrical and autonomous automobiles in addition to paying the dividend.
The dimension and timing of the dividend reinstatement was stunning to many analysts. BofA Securities analyst John Murphy referred to as Ford’s dividend reinstatement “preemptive” given the present volatility within the automotive market. He in addition to different analysts additionally famous the necessity for Ford to put money into its turnaround plan.
Some analysts anticipated Ford’s dividend to be reinstated in 2022 at about half the distribution quantity, however buyers appear to help the transfer, which Barclays’ Johnson referred to as “a positive for some of its investor base.”
– CNBC’s Michael Bloom contributed to this report.