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Ford (F) Q1 Earnings & Revenue Beat Estimates, '21 View Dull

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Ford (F - Free Report) managed to deliver a comprehensive beat in the first quarter of 2021. In fact, this marked the fourth straight earnings beat for the firm. However, shares of the U.S. auto giant fell more than 3% in after-hours trading yesterday, as investors were discouraged by the company’s downbeat guidance amid global chip crunch concerns.

Earnings & Revenue Snapshot                                     

Ford posted first-quarter 2021 adjusted earnings of 89 cents per share, breezing past the Zacks Consensus Estimate of 16 cents and turning around from the year-ago loss of 23 cents. Higher-than-expected revenues, primarily in Europe and North America markets, led to the outperformance. Its consolidated fourth-quarter revenues came in at $36.2 billion, up 5.5% year over year. Importantly, the company generated automotive revenues of $33.5 billion, which outpaced the Zacks Consensus Estimate of $31.1 billion.

Segmental Performance

For the first quarter, total wholesale volume in the Ford Automotive segment slid from the prior-year period to 1,062,000 units. However, revenues of the segment rose 5.5% year over year to $33.6 billion., Automotive earnings before interest and taxes (EBIT) of $3.4 billion turned around from the loss of $177 million incurred in the corresponding quarter of 2020, backed by the firm’s restructuring efforts and massive business improvement, primarily in Europe and North America. 

In North America, revenues edged up 5% year on year to $23 billion for the reported quarter, aided by strong demand for Mustang Mach-E, 2021 F-150 and Bronco Sport models. The metric also surpassed the Zacks Consensus Estimate of $20.9 billion. While wholesale volume contracted 14% from the year-earlier quarter to 533,000 units, EBIT skyrocketed 752% to $2,949 million, thanks to favorable pricing strategy and product mix.

In South America, revenues plummeted 40% year over year to $0.4 billion for the fourth quarter. Wholesale volume dwindled 70% from the year-ago quarter to 18,000 units. However, the unit’s pretax loss narrowed from $113 million in the prior-year quarter to $73 million. Cost cut and rejig efforts helped it counter weak industry demand and economic uncertainties.

In Europe, revenues grew 13% year on year to $7.1 billion for the March-end quarter, topping the consensus mark of $6.7 billion. While wholesale volumes tapered off 4% year over year to 278,000 units, EBIT totaled $341 million, reversing the year-ago loss of $143 million, thanks to aggressive restructuring initiatives. During the quarter under review, Ford commenced shipments of Mustang Mach-E in Europe and announced plans to invest $1 billion to establish the Ford Cologne Electrification Center to rev up e-mobility goals.

In China, revenues soared 39% year over year to $0.8 billion for the reported quarter. Wholesale volume climbed 85% from the prior-year figure to 150,000 units and pretax loss narrowed from $241 million to $15 million for the quarter under review.

In the International Markets Group, revenues scaled up 15% from the year-ago figure to $2.3 billion. Wholesale volume increased 5% from the prior-year level to 82,000 units and pretax earnings totaled $201 million against $26 million loss incurred in the comparable year-ago period. In fact, International Markets Group achieved its highest pretax profit ever, thanks to low structural costs.

First-quarter revenues from the Ford Credit unit declined 10.2% year over year to $2,663 million. Revenues from Ford Mobility came in at $11 million, on par with first-quarter 2020.

Financial Position

The Zacks Rank #3 (Hold) company recorded negative adjusted free cash flow free cash flow (FCF) of $396 million. Ford had cash and cash equivalents of $21,826 million as of Mar 31, 2020 compared with $25,243 million on Dec 31, 2020. Automotive long-term debt increased to $24,819 million on Mar 31, 2021 from $22,633 million in the corresponding period of 2020. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ford Hit Hard By Chip Crunch

In early February, Ford — which shares space with General Motors (GM - Free Report) , Tesla (TSLA - Free Report) and Volkswagen (VWAGY - Free Report) — already warned that semiconductor shortages will adversely impact the firm’s 2021 adjusted EBIT, which is forecast in the range of $1-2.5 billion. Fire breakout at a Renesas Electronics chip plant in March only exacerbated the chip famine. Amid the acute chip shortage, Ford lowered its guidance and expects a $2.5 billion hit to earnings. Consequently, it now anticipates full-year 2021 adjusted EBIT in the band of $5.5-$6.5 billion. Guidance for adjusted FCF is also cut and is currently envisioned in the range of $500-$1.5 billion versus the prior forecast of $3.5-4.5 billion.

The company has warned that the microchip shortfall would slash second-quarter output by 50%. Ford now anticipates losing 1.1 million units of production in 2021 due to chip concerns. What’s worse, it expects the global chip shortage issue to persist till 2022.

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