Thursday, October 29, 2020

Ford Reports Strong Profits After a Rough Ride

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News shaping
the markets today

     

What’s happening: Shares of Ford Motor Co. climbed in post-hours trading on Wednesday after the carmaker surprised markets with a strong surge in profits for the third quarter.

What happened: Ford released its first quarterly report under new CEO Jim Farley, who took over at the company’s helm after Jim Hackett’s retirement in August.

Investors cheered the healthy growth in profits, especially after the second quarter report had been an epic disappointment. Ford, which was earlier projecting a loss for the full year, said it expects pretax profits.

How were the results: The automaker reported a surge in profits for the third quarter, with both top- and bottom-line results exceeding expectations.

  • Revenues grew to $37.5 billion, from $37 billion in the same quarter last year. The figure surpassed the consensus view of $35.7 billion.
  • Earnings came in at $2.4 billion, or 60 cents per share, up significantly from $400 million, or 11 cents per share, a year earlier.
  • Excluding one-time items, the company’s earnings rose to 65 cents per share, from 34 cents per share, exceeding market expectations of 20 cents per share.

Why it matters: Ford has seen an improvement in market sentiment since Jim Farley took over the top position in the company. Farley intends to kickstart a restructuring plan, which markets are optimistic would help the company leave the worst behind it.

Ford expects its new product launches, including electric Mustang Mach-E and the redesigned version of its F-150 pickup, to enable it to deliver a strong rebound. The company also said it had repaid its revolving credit loans of $15 billion and ended the quarter with around $30 billion in cash and cash reserves worth $45 billion.

Management guided to strong results for the fourth quarter, projecting pretax profits between $600 million and $1.1 billion for the full year. Earlier in July, Ford had projected losses in the fourth quarter and the full year.

How shares responded: Shares of Ford gained 4.7% to reach $8.06 in after-hours trading on Wednesday following a 2.8% decline during the regular trading session. The stock has climbed around 10% over the previous three months.

What to watch: Investors look forward to the new model launches by the company and will closely monitor their progress. Markets are also optimistic about the new CEO being able to execute a strong turnaround for Ford.

The Markets Today

     

US stocks will be in focus today, ahead of various major economic reports due for release through the day.

Context: Wall Street closed sharply lower on Wednesday as investors were worried about the alarming surge in covid-19 cases halting the economic rebound.

Details: Investors remained concerned about the resurgence of coronavirus cases coinciding with the upcoming flu season. The rolling 7-day average of new infections surged to a record 70,000 in the US on Tuesday, with covid-19-related hospitalisations climbing around 10% last week.

With European countries reporting a rise in new infections, France and Germany announced plans to impose new social restrictions to prevent the further spread of the virus.

Market sentiment was also hit by the failure of the US government to pass the fresh stimulus package, which there is a great deal of nervousness about the upcoming elections.

There was some good news though, which General Electric Company’s shares climbing as much as 5% after the company surprised markets with a profit for the latest quarter. Shares of Tupperware Brands jumped 35% following upbeat third-quarter results.

The rise in these stocks was not enough, however, to prevent US indices from declining. The Dow Jones index shed 943 points to settle at 26,519.95 on Wednesday, sending the blue-chip index further into a negative zone for the month. The S&P 500 fell 3.5% to 3,271.03, while the Nasdaq 100 lost more than 3% to end the session at 11,004.87.

What to watch: Investors await a basket of economic reports from the country, including GDP growth, initial jobless claims, and pending home sales. The US economy is expected to grow by 25%-30% in the third quarter. Initial jobless claims are projected to decline to 775,000 in the latest week, from 787,000 in the prior week. Analysts expect pending home sales to rise 3.4% in September.

Markets will also keep an eye on the rising covid-19 numbers, with total cases in the US approaching 9 million.

Other Markets: European trading indices closed lower on Wednesday, with the FTSE 100, German DAX 30, and French 40 down by 2.55%, 4.17% and 3.37%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Spain’s consumer prices and industrial confidence, Germany's unemployment and inflation rate, Italy’s consumer confidence index and manufacturing confidence index, UK’s car manufacturing output, consumer credit, mortgage approvals and lending, South Africa’s producer prices, Brazil’s net payrolls, Eurozone’s consumer confidence indicator, economic sentiment indicator, industry confidence indicator, services confidence indicator, consumer confidence price trends and the ECB’s interest rate decision, Canada’s average weekly earnings and value of building permits as well as the US EIA’s natural gas stockpiles.