When Ford (NYSE:F) posted Q2 results, investors were bracing for the bad news. It posted an EBIT loss of $1.9 billion. This still beats the 4.71 billion loss consensus. What did Ford do to minimize losses?
Ford increased its liquidity through committed asset-back facilities. It also kept its loss-to-receivables low. Helped by better auction values, earnings before taxes topped $543 million. It has a liquidity of $32 billion. This will allow the company to weather the storm as the global slowdown continues.
In the current third quarter, cash flow will exceed EBIT but lower in Q4. Product launches, seasonal effects, and the timing of working capital will add variability to free cash flow. In the back half of the year, Ford will post profits in the $500-million-to-$1.5-billion range.
Ford’s Bronco is a positive catalyst. Ford said on the conference call that it received over 100,000 reservations. If all orders convert to sales, then Ford has $4.5 billion in potential revenue, using $45,000 as the midpoint sale price. Ongoing demand for the F-150 will minimize the drop in revenue.
Mach-E sales are unknown. Still, the market is hungry for something new in the electric vehicle space. Ford’s Mustang EV SUV is well-positioned to grow market share.
Disclosure: the author owns Ford shares.
