Ford beats Wall Street earnings expectations after coronavirus shuttered factories

• Ford performed far better than Wall Street expected during the second quarter, even beating its own expectations.
• The automaker reported an adjusted pretax loss of $1.9 billion – more than $3 billion better than expected. 
• U.S. auto sales turned out to be more resilient than anticipated, and the company resumed normal shift operations at domestic plants a month ahead of schedule.

Visitors walk past a Ford Escape Titanium at the Shanghai Auto Show in Shanghai on April 17, 2019.

Greg Baker| AFP | Getty Images

Ford Motor performed far better than Wall Street expected during the second quarter, even beating its own expectations as the coronavirus caused rolling shutdowns of its plants across the globe.

The company was profitable, reported less operational losses than expected and has already started repaying against credit lines it drew down earlier this year to manage through the coronavirus pandemic.

Here's how Ford performed versus what Wall Street expected, based on average analysts' estimates compiled by Refinitive.

• Adjusted EPS: A loss of 35 cents per share versus a loss of $1.17 per share expected.
• Automotive revenue: $16.6 billion versus $15.95 billion expected.

Shares of Ford jumped more than 4% in post-market trading after releasing its earnings Thursday evening. The stock closed at $6.74, down 2.6%.

Ford reported an adjusted pretax loss of $1.9 billion – more than $3 billion better than expected. 

Ford CFO Tim Stone warned investors in April that the company expected to lose more than $5 billion, on an adjusted pretax basis, during the second quarter as the pandemic shuttered factories and severely hampered auto sales.

Quicker recovery

A faster-than-expected recovery in sales, including favorable pricing and better mix, as well as "operational execution" contributed to the company's second-quarter performance, Stone told reporters Thursday.

Ford expects an adjusted pretax profit of between $500 million and $1.5 billion in the third quarter as long as economic conditions remain favorable without production disruptions, Stone said.

The company managed to report a net profit of $1.1 billion during the second quarter, including a $3.5 billion gain on a previous investment in autonomous vehicle startup Argo AI.

An Argo-modified Ford autonomous vehicle parked in Manhattan on Friday, July 12, 2019.

Paul Eisenstein | CNBC

Ford owns about 40% of Argo AI following German automaker Volkswagen purchasing an equal stake in the company from Ford at an evaluation of $7.5 billion. The investment closed in June. 

Analysts and investors were watching to see if Ford would be able to pare back those expected losses since consumer demand in the U.S. was stronger than anticipated, especially for rugged trucks and SUVs. The company also resumed normal shift operations at domestic plants a month ahead of schedule.

Cash burn

Ford burned through $5.3 billion during the second quarter, up from $2.2 billion during the first quarter — numbers that are being closely tracked by Wall Street. The automaker said it ended the second quarter with automotive liquidity of $39.8 billion.

For comparison, General Motors, which reported its second-quarter earnings Wednesday, said it lost $536 million on an adjusted basis, which was better than Wall Street expected.  On an unadjusted basis, the company lost $806 million and it burned through $7.8 billion in cash during the quarter.

Both Ford and GM roughly doubled their automotive debt to $30 billion during the first quarter to help bolster their balance sheets and get through the Covid crisis.

GM said Wednesday it expects to repay a $16 billion revolving credit line it drew down in March by the end of the year.

Ford said Thursday it has already repaid $7.7 billion against revolving credit lines, and also extended $4.8 billion of its three-year revolving credit lines.