Ford Motor Company reported its fourth quarter and full year 2023 earnings on February 6th, beating Wall Street estimates and projecting strong growth in 2024. The company announced both regular and supplemental dividend payments to shareholders on the back of the positive results.
Q4 Financial Results Top Expectations
Ford posted Q4 adjusted earnings per share of $0.29 on revenue of $46 billion (Source 1). This handily beat analyst expectations of $0.17 adjusted EPS, representing a 70% earnings surprise to the upside (Source 2).
The strong quarter was driven by healthy demand across Ford’s product portfolio. CEO Jim Farley stated “We’re hitting our stride managing costs and executing our plans to transform Ford to run a much leaner, more efficient business that can deliver high quality growth over the long term” (Source 3).
| Q4 2023 Key Figures | Result | Consensus Estimate |
|---|---|---|
| Revenue | $46 billion | $44.9 billion |
| Adjusted EPS | $0.29 | $0.17 |
Ford’s core auto operations saw a 35% jump in EBIT to $2.6 billion. The company’s commercial vehicle segment was especially strong, with a record $1.7 billion in EBIT driven by robust demand for the F-Series trucks and E-Transit vans (Source 4).
The fourth quarter results marked a recovery from Ford’s $827 million net loss in Q3, as the company implements its multi-year restructuring plan to improve profitability.
Significant Earnings Growth Forecast for 2024
Alongside the Q4 results, Ford issued an outlook projecting healthy profits in 2024 based on continued strong commercial vehicle demand. The company forecasts EBIT to land between $9 billion and $11 billion, representing 12-15% EBIT margins (Source 5). This would mark a significant jump from 2023’s EBIT of $7 billion.
“Last year was foundational for Ford. We made tremendous progress both financially and operationally to transform the company for growth and value creation…We have momentum rooted in fundamentals, and we expect 2024 to build on our progress,” said CFO John Lawler (Source 6).
Ford sees commercial vehicle leadership as a key driver of its earnings expansion plans in 2024 and beyond. The company is investing heavily to boost production capacity to meet robust demand in the space.
Dividend Announcements Reward Shareholders
On the back of Ford’s improving financial performance, management announced the restoration of the company’s regular dividend to pre-pandemic levels of $0.15 per share. This comes after dividends were previously cut from $0.60 per share in early 2020 when the COVID crisis began impacting operations (Source 7).
Additionally, Ford declared a supplemental cash dividend of $0.65 per share to be paid in Q2 2024. This one-time additional dividend aims to share profits with shareholders as the restructuring efforts gain traction (Source 8). Between the regular and supplemental dividends, Ford is distributing approximately $3.5 billion to shareholders.
The return of dividends and additional payouts signal management’s confidence in the sustainability of Ford’s financial performance improvement. The dividends also make Ford shares more attractive for income focused investors.
Ford Stock Jumps on Results & Outlook
Ford’s better than expected fourth quarter earnings results and strong 2024 profit guidance sparked a stock price rally the day after the report (Source 9). Ford shares closed 6% higher on February 7th, adding over $2 billion to the company’s market valuation.
The stock price jump comes despite Ford posting a full year 2023 net loss of $2 billion, as investors looked ahead to the promise of much improved profitability in 2024 and beyond. With Ford shares having fallen 33% over the past year, the stock remains attractively priced for long-term investors.
Restructuring Efforts Bearing Fruit
Ford embarked on an extensive global restructuring program in 2020 aimed at transforming operations and boosting profit margins over the long run. This involved discontinuing unprofitable vehicle lines, rightsizing staffing levels, partnering more closely with suppliers, and streamlining its geographic footprint.
The early fruits of these restructuring efforts were reflected in Ford’s improving financial performance through 2023. And with the major restructuring initiatives now largely completed, Ford appears poised to reap even greater benefits in 2024 and beyond.
The UAW auto workers union contract ratified in late 2023 also provides Ford with more flexibility in allocating staff across its US plants to respond efficiently to shifts in market demand (Source 10). This positions the company well from an operational perspective heading into 2024.
Strategic Emphasis Remains on Commercial Vehicles & EVs
Ford’s growth strategy continues to focus heavily on expanding its commercial vehicle lineup to build on the dominant position of the F-Series pickup trucks. The company is investing $700 million to boost production capacity for commercial EVs, including the E-Transit cargo vans and F-150 Lightning electric trucks (Source 11).
While Ford is pulling back investment in passenger car EVs, it maintains a long-term commitment to electrification more broadly. CEO Farley emphasized “We are moving full speed ahead to lead an electric and software-driven revolution for Ford” (Source 12).
On the software side, Ford is focused on developing advanced driver assist and hands-free highway driving technologies. Though some analysts note Ford is not positioned to rival EV leader Tesla in the areas of batteries and software (Source 13).
Outlook Remains Positive Though Risks Persist
With significant restructuring efforts now in the rearview mirror and demand trends supporting improved profitability, Ford appears to have turned a corner financially. If 2024 results come in line with guidance, the profits could allow an acceleration of investments in growth areas like commercial EVs and vehicle software.
However, Ford still faces an uncertain macroeconomic environment, with risks like high inflation and rising interest rates persisting. Additionally, the auto sector remains fiercely competitive. Ford management struck an appropriately cautious tone by targeting rather than guaranteeing the 2024 earnings guidance.
But on balance, Ford’s improving cost structure, market leadership in key commercial vehicle categories, dividend payout plans, and focus on high-margin areas position the company well for the next few years. Investors welcomed the fourth quarter results and 2024 outlook as confirmation that CEO Jim Farley’s vision for a leaner, more profitable Ford is taking shape.
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