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Ford Motor shares climb on upbeat 2024 guidance, supplemental dividend

Published 02/06/2024, 04:33 PM
Updated 02/07/2024, 07:16 AM
© Reuters.

Investing.com -- Shares in Ford Motor (NYSE:F) climbed in premarket U.S. trading on Wednesday after the automotive giant unveiled a 2024 revenue outlook that topped analysts' expectations and vowed to return more cash to its stakeholders.

Michigan-based Ford guided for annual pre-tax income of $10 billion to $20 billion, above Bloomberg consensus estimates of $9.5 billion. The announcement, which echoed a similarly rosy outlook from rival General Motors (NYSE:GM), was driven by solid returns from its combustion-engine trucks.

The company subsequently announced that it would deliver a supplemental dividend of $0.18 per share for the first quarter, along with a regular pay-out of $0.15.

Ford's commercial fleet vehicles unit Pro and its gas-powered car division Blue are both anticipated to be profitable this year, helping offset a predicted loss of as much as $5.5 billion at the firm's Model E electric vehicle segment.

Costs, meanwhile, are predicted to be flat year-on-year. Chief Financial Officer Kumar Galhotra said that Ford will achieve $2B in savings "in areas like material, freight and manufacturing." However, the belt-tightening is predicted to be offset by higher labor expenses stemming from pricier contracts secured by unionized workers following prolonged strikes.

But executives told analysts that they were slowing investments on next-generation electric vehicles due to "seismic" price changes around non-combustion cars in the past year. Instead, Chief Executive Officer Jim Farley noted, all of Ford's EV teams will be focused on securing "cost and efficiency" in its clean-engine products.

"[T]he ultimate competition is going to be the affordable Tesla (NASDAQ:TSLA) and the Chinese [car manufacturers]," Farley said.

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EV giant Tesla has been engaged in an ongoing price war with domestic automakers in China, slashing sticker prices in a bid to secure its place in one of the world's most lucrative auto markets. Tesla has also brought down prices elsewhere to help entice prospective buyers wary of elevated borrowing costs and a slowdown in state subsidies for EVs.

In a note to clients, analysts at Morgan Stanley argued that Ford's "strong relationships" in China will aid the development of its EV strategy.

In August, Changan Ford Motor -- a 50-50 joint venture (JV) between Ford and Chinese state-backed carmaker Changan Automobile -- launched plans to establish a new-energy passenger car JV with Beijing-owned Chongqing Changan Automobile. Farley reiterated on Tuesday that the move reflects Ford's strategy to allow its Chinese partners to "lead our electrification" in the country.

A separate partnership with battery company CATL has also received scrutiny from Republican lawmakers in Washington, who have flagged concerns that the deal could leave a major U.S. company dependent on Chinese technology.

"Geopolitically complicated? Certainly. But clarity here within an uncertain trade outlook holds the keys to EV relevancy for Ford
[...] in our view," the Morgan Stanley analysts said.

Yasin Ebrahim contributed to this report.

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