If you think about the auto industry after COVID, likely your first reaction is stay away from investing in the sector. Highways are less busy, people are using less gasoline, the normal commuting to downtowns or work is less and if people are staying home more there should be less demand on new vehicles.
Ford surprised everyone when it announced its latest quarter, it made money on strong demand for pickups and SUVs. Ford reported a net income in the third quarter of $2.4 billion or 60 cents a share versus $400 million or 11 cents a share a year earlier.
In an article from Reuters Ford’s profit was $3.6 billion or 65 cents a share, analysts had expected 19 cents a share.
The company repaid a $15 billion in revolving credit loans and ended the quarter with nearly $30 billion in cash and more than $45 billion in liquidity.
The company’s adjusted EBIT margin in the quarter was 9.7% with a full year target of 8%.
Fiat Chrysler also made a operating profit of $4 billion on margins of 13.8%.
Linking to dividend paying stocks, the automobile companies are often counted out because there is great change in the industry, however there are good margins and even if sales are slower, once they pick up profits are to made. If you read about the industry and the electronics in the vehicles, one day we can set the car on the highway and have a nap, vehicles are not going away. Too many people need vehicles to move around the neighborhoods where they live. The auto industry will continue to change and as long as margins are good, they will survive and grow.
There are more questions than answers, till the next time – to raising questions.