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Ford Sinks as Supply Shortages Lead to Earnings Shortfa...

Business Maverick

Business Maverick

Ford Sinks as Supply Shortages Lead to Earnings Shortfall

Jim Farley, president of Ford Motor Co. Europe, poses for a photograph during a launch event ahead of the 87th Geneva International Motor Show in Geneva, Switzerland, on Monday, March 6, 2017. The show opens to the public on March 9, and will showcase the latest models from the world's top automakers.
By Bloomberg
04 Feb 2022 0

Ford Motor Co. missed analysts’ fourth-quarter earnings estimates after sales failed to hit Wall Street’s most optimistic forecasts. Shares dropped as the automaker warned of higher commodity costs in the year ahead.

Ford posted earnings of 26 cents a share excluding some items, less than the 45 cents analysts predicted on average. Ford said Thursday that supply constraints for critical components such as semiconductors prevented the company from meeting customers’ demand. Wholesale deliveries fell 11% in the last quarter to 1.1 million vehicles.“We have incredible demand for our products,” John Lawler, Ford’s chief financial officer, told reporters on a call. “It’s the supply chains that limited what we could produce and what we could provide. And we see that easing into ’22, and you’ll see that flowing through our profits.”

The stock fell as much as 7.9% to $18.32 in extended trading. It’s down 4.2% this year through Thursday’s close.

For 2022, Ford forecasts earnings of $11.5 billion to $12.5 billion before interest and taxes, up 15% to 25% over 2021. That compares with analysts’ estimates of $12.2 billion. Adjusted earnings before interest and taxes of $2 billion were less than the $2.77 billion analysts expected.

Sales rose 5% to $37.7 billion in the fourth quarter, with automotive revenue accounting for $35.3 billion of that total and surpassing the $34.6 billion analysts expected.

Some analysts had expected double-digit sales growth, Lawler said. The company is projecting $1.5 billion to $2 billion in higher commodity costs this year.

Investors have cheered Chief Executive Officer Jim Farley’s effort to accelerate Ford’s switch to electric vehicles, sending the shares up 136% last year and making the company the top automotive gainer. Ford’s market briefly topped $100 billion.

In recent weeks, that valuation has fallen back to around $80 billion.

“Financial performance is obviously critical,” Farley said in a statement.  “We’re also proud that customers see how Ford is taking EVs mainstream.”

Bloomberg News reported on Feb. 1 that Ford is considering adding up to $20 billion to its EV spending over the next decade to convert factories to battery powered models. Farley has already tripled output of its electric Mustang Mach-E in Mexico and doubled production of the F-150 Lightning going on sale this spring.

 

Dearborn, Michigan-based Ford has seen car buyers pay up for its models as the pandemic and a shortage of semiconductors slashed inventory on dealer lots, causing discounts to dry up. Average sale prices for Ford models in the U.S. reached almost $51,000 in the fourth quarter, up from $46,211 a year earlier, according to automotive researcher Edmunds.com.

Crosstown rival GM earlier this week reported fourth-quarter earnings that beat analysts’ estimates but its forecast for the year was little changed from 2021.

Read more: GM sees high costs, budget cars capping profit

In its home market of North America, Ford grew its adjusted profit before interest and taxes by 70% in the fourth quarter to $1.82 billion, mainly due to strong demand for vehicles like its Bronco SUV and Maverick pickup. But that undershot the $2.34 billion profit projected by analysts.

Ford’s loss in China, the world’s largest car market, more than doubled in the quarter to $150 million from $66 million the previous year.

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