Ford Motor late Thursday missed earnings and revenue estimates for the final quarter of 2021, while warning chip shortages and supply challenges continue in early 2022. Ford stock plunged Friday.
In a Friday note to investors, Deutsche Bank analysts flagged potentially aggressive guidance.
"We worry that management's 2022 EBIT (earnings before interest and taxes) guidance for $11.5-$12.5 billion could be too optimistic on volume, pricing and commodities cost assumptions," DB analyst Emmanuel Rosner wrote. Management's outlook comes "despite Ford expecting half of GM's volume growth this year," Rosner added. He backed a hold rating and cut his price target on Ford stock by $3 to $21.
On Ford's earnings call late Thursday, CEO Jim Farley said that, "While we remain in the teeth of the Covid crisis and semiconductor shortages, our overall business is still in great shape."
The comment came ahead of what one analyst called Ford's launch of the decade. The first electric version of Ford's bestselling pickup truck, the F-150 Lightning unveiled last May, is due to arrive in spring. Ford is among global automakers making a huge shift away from traditional internal combustion engines to electric vehicles.
"We are at the very beginning of this (EV) journey and it's already exciting from the profit improvement" perspective, Farley said. The company "found $1,000 of (cost-saving) opportunity" on the Mustang Mach-E just last month through design simplification, he added.
In a Q4 earnings news release, Ford said customers have ordered or reserved more than 275,000 all-electric Mustang Mach-E SUVs, F-150 Lightning pickups and E-Transit commercial vans. Those vehicles are the spearhead of its EV transition.
Ford Earnings
Estimates: Wall Street expected Ford earnings to jump 32% to 45 cents per share. Revenue is seen rising 15% to $41.23 billion, according to FactSet.
Results: Ford earnings slid 24% to 26 cents per share. Revenue rose 5% to $37.7 billion. While revenue rose 17% in North America, it plunged 27% in China and also fell in all international markets. The Covid-19 omicron variant disrupted several of Ford's key suppliers in the quarter, hitting vehicle production and sales despite robust consumer demand, management said on an earnings call late Thursday.
Outlook: For 2022, Ford expects adjusted EBIT of $11.5 billion-$12.5 billion, an increase of 15%-25% over 2021. On a per-share basis, analysts forecast 2022 Ford earnings of $2.05, FactSet said. That would be up from 2021 EPS of $1.59.
The outlook assumes "continued variability in supplies of key components" tied to Covid shutdowns and semiconductor shortages. It sees wholesale volumes declining in Q1 but up 10%-15% for the full year. It also assumes continued profitability in North America and strong pricing, offset by inflationary pressures. GM forecasts a 25%-30% volume rebound this year.
In Q4, Ford's vehicle deliveries fell around 6% year over year in the U.S., though Ford took the sales crown and managed a quarter-over-quarter improvement. In all of 2021, Ford's U.S. deliveries fell 7%, while China deliveries rose 3.7%.
For the quarter, adjusted EBIT fell within the $9.6 billion-$10.6 billion range that Ford guided to in October, following the reclassification of its Q1 2021 gain on its investment in Rivian after the EV startup's initial public offering.
For automakers broadly, vehicle supplies rather than demand are weighing on sales as semiconductor supply issues persist.
Offsetting weak sales, average transaction prices continue to rise. In Q4, Ford's average prices in the U.S. rose by nearly $5,000 year over year to $50,867 per vehicle, according to Edmunds.
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Ford Stock
Shares of Ford Motor plunged 9.7% to 17.96 Friday after falling 4% in Thursday's stock market trading. Ford stock has undercut its 10-week moving average and is approaching the 40-week line. Shares remain far extended following an October breakout.
The relative strength line for Ford stock is falling after a solid rally in the past year, according to MarketSmith chart analysis.
GM stock fell 3.4% Friday after mixed quarterly results late Tuesday. CEO Mary Barra disclosed an ambitious EV sales goal at General Motors on an earnings call.
Tesla rallied 3.6% and Stellantis, which includes Fiat, Chrysler and Peugeot, fell retreated 3.5%.
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EV Sales Surge
In January, Ford's EV sales rose 167% to 13,169 vehicles, and the new Mustang Mach-E SUV made up 18% of the total. Ford's total U.S. sales were flat last month.
In the past year, Ford stock soared as the former EV skeptic went full-bore on electric vehicles. But automakers have been facing supply challenges, including an auto chip shortage.
On Tuesday, General Motors surprised Wall Street with its forecast for a 25%-30% volume rebound this year. GM sees the chip situation improving throughout 2022. That contrasted with Tesla, which expects its chip supply constraints to continue throughout 2022.
"The F-150 Lightning arguably might be Ford's most important vehicle launch of the decade, and there's immense pressure on the automaker to execute a flawless rollout," Edmunds analyst Jessica Caldwell wrote Feb. 1. But that might be a tall order given supply chain challenges over the past year, she added.
On Tuesday, GM disclosed 110,000 reservations for its Chevy Silverado electric truck, unveiled in January and due in 2023 . It's a rival to Ford's F-150 Lightning, which racked up 200,000 reservations within six months of unveiling last year. Ford started accepting purchase orders from reservation holders earlier this month.
EV Shift; Auto Chip Shortage Hits Ford Stock
On Tuesday, Bloomberg reported that Ford may spend up to $20 billion more to develop and build electric cars, on top of the $30 billion that the auto giant already has pledged through 2025.
A shift among automakers, including Ford, GM and Stellantis, to electric vehicles has been stymied by a lingering auto chip shortage. Increasingly smart electric vehicles need more chips than traditional gas or diesel vehicles.
By 2030, the Detroit 3 aspire to have as much as half their total vehicle sales be electric — a bold goal given that fossil-fuel vehicles underpin almost all their earnings today.
The global chip shortage, fueled by the pandemic, cost automakers $210 billion in lost revenue in 2021, with 7.7 million fewer vehicles rolling off production lines, the consulting firm AlixPartners estimates.
Both GM and Ford idled or shut several plants, including those making some of their most popular and profitable vehicles, such as Ford's F-150 truck.
Find Aparna Narayanan on Twitter at @IBD_Aparna.
