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Ford Delivers 1Q Earnings Beat, FY21 Earnings To Take A $2.5B Hit; Shares Fall

Shares of Ford Motor Co. (F) tanked 8.9% in early trading on Thursday despite the automaker delivering first quarter earnings that beat analysts’ expectations. Its stellar performance was overshadowed by a global chip shortage that could drag down the company’s adjusted EBIT by up to $2.5 billion for FY21.

The company has forecast adjusted EBIT to range between $5.5 billion and $6.5 billion in FY21. Earlier this year, Ford said that it expected the global semiconductor shortage to negatively impact annual manufacturing volumes by 10% to 20%.

Ford’s 1Q revenues were up 6% year-on-year to $36.2 billion and came in ahead of analysts’ estimates of $36 billion. The company reported diluted EPS of $0.81 versus a loss per share of $0.50 in the same quarter last year. Analysts were expecting diluted earnings of $0.22 per share.

Ford’s president and CEO, Jim Farley said, “Our team is relentlessly executing our plan to turn around our automotive business so that we can create and deliver the high-value, always-on experience that our Ford and Lincoln customers deserve. There’s no question we’re becoming a stronger, more resilient company.”

To add to the company’s woes in FY21, there was a fire at one of its suppliers in Japan, Renesas Electronics, that will result in Ford losing half of its planned production in 2Q.

While Ford expects that semiconductor supply from Japan will resume by the end of 2Q, it does not expect the chip supply shortage to be completely resolved until 2022. As a result, Ford has forecast a loss of 10% of its planned production in the second half of this year. (See Ford Motor Co. stock analysis on TipRanks)

In all, the company now expects a loss of 1.1 million units of production for FY21.

Following the earnings, Morgan Stanley analyst Adam Jonas reiterated a Sell and a price target of $9 on the stock (21% downside potential). Jonas said in a research note that Ford “has every opportunity to execute a path that could achieve our $18 bull case valuation.”

However, Jonas remained bearish about the stock and stated, “Ford’s 1Q was far ‘too good’ to extrapolate while the remainder of the year is ‘too challenged’ to extrapolate. Put it all together and the most favorable auto supply/demand balance in a generation and Ford’s cost cutting efforts are bearing fruit at a critical time for the House of Dearborn.”

Overall, consensus on the Street is that Ford is a Moderate Buy based on 8 Buys, 6 Holds, and 1 Sell. The average analyst price target of $13.79 implies upside potential of about 22.2% from current levels.

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