Get ready for what could be a wild earnings report from
On Wednesday night. The global semiconductor shortage that is limiting global auto production is likely to lower both profits and cash flow. And what can happen to?
‘s financial forecast for the full year is a guess.
Clean communication is what the stock needs to build on its gains of more than 50% so far in 2021. Auto sales are hot, so clear should be enough for the stock, no matter how an odd second quarter turned out.
Ford (ticker: F) caused some confusion in April when it released its first quarter results. It said it expects an operating profit of about $6.5 billion in 2021, including the effects of the semiconductor shortage, but not counting a $900 million gain on the sale of part of its stake in the electric vehicle company Rivian. .
The problem was that in February, Ford had projected about $8.5 billion in 2021 operating profit, so on the face of it, the forecast appeared to have been slashed. But the February issue included Rivian’s gains and excluded the impact of the semiconductor shortage.
The implied impact of the deficit was about $1.1 billion, about what would have been expected given what other automakers were saying. Still, the communication was honestly a little hard to follow. Some analysts said they were confused.
The stock fell 9.4% the next day, dropping to $11.26 a share. On Monday, the stock closed at $14.03, bringing its annual profit to about 56%.
For the second quarter, Wall Street expects a loss of 3 cents a share on revenue of $23 billion. That would be a sharp turnaround from the first quarter, when the company earned 89 cents on $36.2 billion in revenue.
The problem is production, not demand. Ford said during its first quarter results conference call that the global semiconductor shortage could hit production by as much as 50% in the second quarter. We now expect to lose about 50% of our planned Q2 production, said CFO John Lawler. Up from a 17% loss in the first quarter, making the second quarter the low for our performance this year.
What investors want on Wednesday night is reassurance that no more bad news is on the way. The deficit isn’t over yet, but investors would like to know that the second quarter was the worst. That wouldn’t mean new cuts in guidance due to a lack of semiconductors.
Production, the chip shortage and the outlook for profits in 2021 are on the agenda for Wednesday evenings one, two and three. Number 4 is probably the electrification of vehicles.
For June, Ford reported a 117% year-over-year increase sales of electric vehicles to 56,570. Mustang Mach E sales came in at 12,975, up 27% from May.
In May, Ford said it plans to spend $30 billion on vehicle electrification by 2025, up from a previously set goal of $22 billion. The additional $8 billion is intended to support Ford’s plans to produce EV batteries.
Barron’s recently wrote positively about Ford, believing that new management could revitalize its EV plans and its existing product line. Since that article, Ford’s stock is up about 51%, outperforming the respective 21% and 17% comparable gains of the
Dow Jones industrial average.
Write to Al Root at email@example.com