Why Ford Stock Is Up By 10% Today

Ford Rallies On Strong Q3 Report

Shares of Ford moved to multi-year highs after the company reported its third-quarter results.

Ford reported revenue of $35.7 billion and adjusted earnings of $0.51 per share, easily beating analyst estimates on both earnings and revenue. The company’s revenue declined on a year-over-year basis, but it exceeded analyst estimates despite chip shortage that remained a problem for the whole industry.

The company stated that demand for its products was strong and that Ford should enjoy solid performance in North America as semiconductor volumes increase.

Ford decided to increase its full-year 2021 adjusted EBIT guidance to $10.5 billion – $11.5 billion. Full-year 2021 adjusted free cash flow guidance remained intact at $4 billion – $5 billion.

Importantly, the company announced that is board of directors reinstated quarterly dividend starting in Q4. Ford will pay a quarterly dividend of $0.1 per share, so the stock yields about 2.35% at current levels.

What’s Next For Ford Stock?

Ford stock moved higher in recent months despite worries about chip-related problems as the market focused on demand for Ford vehicles and the company’s ambition to build its presence in the EV market.

It looks that Tesla‘s rally also provided some support to the stock, which is trading at a huge discount to the leading EV play. Analysts expect that Ford will report earnings of $1.63 per share in 2021 and $1.87 per share in 2022, so the stock is trading at 9 forward P/E while Tesla is trading at an astronomical 136 forward P/E.

While it’s hard to expect that shares of a legacy automaker will suddenly begin to trade at a valuation of a hot tech stock, the huge gap will likely attract more value-oriented players, who will provide support to Ford stock. In addition, the dividend will put Ford on the radar of dividend-oriented individual investors and funds, although the current yield is not big.

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