Ford Discloses Special Items Impacting Q4 Results, $8.2B Gain from Rivian Stake

Shares of Ford Motor Company (F) plunged 8% yesterday, after the automobile maker disclosed certain items, which are deemed to impact its fourth-quarter and FY21 results.

Although the net impact is positive, the one-time nature of these items is a cause of concern for the investors. Shares closed down 7.9% at $22.45 on January 19.

Ford’s Rivian Stake

Ford has an equity investment in electronic vehicle automaker Rivian Automotive, Inc. (RIVN). In Q1FY21, Ford recorded a gain of approximately $900 million from its Rivian investment. But post Rivian’s IPO on November 10, 2021, Ford will have to reclassify the gain as a one-time post-tax special item.

The reclassification means that the $900 million Q1 gain will not be included in the earnings before interest and tax (EBIT) or adjusted earnings guidance for full-year fiscal 2021. This will lower the company’s earlier FY21 earnings guidance of $10.5 billion to $11.5 billion. The news didn’t go well with the investor community, which pushed the stock down 8%.

Furthermore, based on Rivian’s stock price performance to date, Ford is going to record a one-time $8.2 billion gain in equity investments in Q4. Rivian stock has lost 31.1% in value since its listing, after the company failed to meet its 2021 production targets.

Other Special Items

Another impact on Ford’s results will come from an annual revaluation of its global pension and post-retirement employee benefits due to higher discount rates and asset returns. This revaluation will result in a non-cash, pre-tax gain of $3.5 billion in Q4 and a similar gain of $3.9 billion for FY21.

Additionally, in Q4, Ford will record a $1.7 billion expense associated with the repurchase and redemption of more than $7.6 billion of high-cost debt. This step was taken to reduce the ongoing interest expenses and strengthen its financial position.

Lastly, Ford will also record a $3.6 billion non-cash benefit arising from changes in its global tax structure and its effect on deferred tax assets.

Wall Street’s View

The Wall Street community is cautiously optimistic about the stock with a Moderate Buy consensus rating based on 10 Buys, 6 Holds, and 3 Sells. The average Ford price target of $22.65 implies that shares are almost fully valued at current levels. Meanwhile, shares have gained 95.7% over the past year.

News Sentiment

TipRanks’ News Sentiment and Media Buzz Analysis shows the combined News Score based on Ford’s News Sentiment and Media Buzz.

TipRanks data shows that the News Score for Ford is currently Very Positive based on 115 articles published over the past seven days. 88% of the articles have a Bullish Sentiment compared to a sector average of 60% while 12% of the articles have a Bearish Sentiment compared to a sector average of 40%.

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