What happened

Shares of Ford Motor Company (NYSE:F) were moving higher on Thursday after the automaker reported earnings that crushed Wall Street estimates and raised its guidance for the full year.

As of 1 p.m. EDT, Ford's shares were up about 3.3% from Wednesday's closing price. The stock had been up as much as 6.7% in early trading on Thursday morning.

So what

Ford reported its second-quarter results after the U.S. markets closed on Wednesday, surprising auto investors and Wall Street with a tidy profit. On an adjusted basis, before one-time items, Ford earned $0.13 per share on $26.8 billion in revenue. Wall Street had expected a loss of $0.10 per share on revenue of $23.84 billion. 

A silver 2021 Ford F-150 pickup truck driving on a road with trees in the background.

The chip shortage limited Ford's ability to satisfy strong demand for its all-new 2021 F-150 pickup and other key products in the second quarter. But that strong demand also boosted used-car prices, helping Ford's financing arm make up some of the difference. Image source: Ford Motor Company.

The story is pretty simple. We knew that Ford's production and sales were hurt badly in the quarter by a global shortage of automotive semiconductors. But with all automakers hurt by the chip shortage in a recovering economy, consumer demand for vehicles was exceptionally strong. That, in turn, meant that Ford could sharply reduce its incentives, and that Ford's financing subsidiary got great prices for the off-lease vehicles it sold at auctions. 

In fact, those strong used-car prices helped Ford Credit generate a record pre-tax profit of $1.6 billion. That result helped offset the weak results from Ford's automotive business, which simply couldn't manufacture enough vehicles amid the chip shortage. 

Now what

Ford is optimistic that supplies of chips will improve over the next few months. CFO John Lawler said that auto investors can now expect the company to deliver an adjusted operating profit between $9 billion and $10 billion for the full year, up about $3.5 billion from its earlier guidance. 

Ford also expects positive adjusted free cash flow of between $4 billion and $5 billion, Lawler said, as its production output returns to normal levels.

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