By Senad Karaahmetovic
Shares of Ford (NYSE:F) are up more than 5% in premarket trading Thursday after the automaker reported better-than-expected adjusted EPS for Q2.
The company posted Q2 adjusted EPS of 68c, compared to 13c in the year-ago period and smashing the analyst consensus of 45c per share. Total revenue came in at $40.19 billion in the period to easily top the consensus estimate of $37.05 billion.
For a full year, Ford expects adjusted EBIT in the range of $11.5 billion to $12.5 billion, beating the consensus projection of $11.15 billion. F also expects FY adjusted free cash flow of $5.5 billion to $6.5 billion.
Ford said Q2 vehicle shipments in China were down due to coronavirus lockdown restrictions in the country.
A Morgan Stanley analyst sees a “big beat” from Ford, but remains Equal Weight-rated despite seeing an attractive valuation.
“At the share price, we not only believe the EV 'option' value has been appropriately compressed to near zero NPV (as it should be), but the market may also be undervaluing the run-off cash flows of the ICE portfolio, which is going too far, in our view. ICE will decline, but the decline will go far beyond end of decade and we believe can produce substantial cash flows in the process,” he told clients in a note.
An analyst from JPMorgan maintained his Overweight rating and a $19 per share price target on F stock after a “big beat”.
“We have increased confidence in Ford’s ability to meet its above-consensus full year guidance after the firm reported much stronger than expected 2Q profits, benefitting from a combination of favorable industry mix and pricing as well as company-specific execution,” the analyst said in a client note.
“While macro risks have increased significantly since the company reported 1Q earnings, we believe pent-up retail demand from ~3 years of softer vehicle production and depressed dealer inventories, a needed restock of dealer inventories, and an aged rental car fleet should provide meaningful offsets in case of any protracted downturn,” he added.