Ford Beats Estimates but Outlook Slammed by Chip Shortage

Ford Motor's earnings beat forecasts and it maintains guidance, but the auto giant's second-half output will be hit by the global chip shortage.
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Ford Motor  (F) - Get Report on Wednesday posted first-quarter earnings that beat analysts forecasts and reiterated guidance, but also said second-half production will be hit dramatically by the global semiconductor chip shortage.

Ford posted adjusted earnings of 89 cents a share, four times the 22-cent-a-share adjusted-profit estimate of analysts polled by FactSet.

Revenue totaled $36.2 billion compared with the year-ago total of $39.7 billion. The FactSet consensus called for $36.1 billion in revenue.

Total automotive earnings before interest and taxes outside North America was $454 million, $980 million better than year-earlier quarter. 

Full-year adjusted EBIT now is expected to be $5.5 billion to $6.5 billion, including an about $2.5 billion adverse effect from the semiconductor shortage, Ford said. Adjusted free cash flow for the full year is projected to be $500 million to $1.5 billion.

Ford last quarter pledged $29 billion to revamp its global car and truck lineup to produce electric vehicles as part of its broader strategy to give consumers more choice when it comes to EVs and to compete with the likes of Tesla  (TSLA) - Get Report and other automakers.

Global Chip Shortage Slams Auto Production

At the same time, Ford and other automakers has been grappling with the ongoing global semiconductor chip shortage, which last month forced the No. 2 automaker to idle production of its popular and highly profitable F-150 pickup truck at its plant in Dearborn, Mich.

The automaker said earlier in March that if the global shortage in semiconductors extends, it could take a 10% to 20% loss in first-quarter production, translating into a $1 billion to $2.5 billion hit to its adjusted bottom line.

That proved a reality on Wednesday, with Ford CFO John Lawler noting a potential 10% to 20% adverse effect on manufacturing volumes "...from increasing constraints on global semiconductor supplies entering 2021." 

Lawler said semiconductor availability, which was exacerbated by a fire at a supplier plant in Japan in March, will get worse before it gets better, though the issue "...will bottom out during the second quarter, with improvement through the remainder of the year."

Still, Ford updated its 2021 outlook, saying it now expects to lose about 50% of its planned second-quarter production, up from 17% in the first quarter. The company now assumes that it will lose 10% of planned second-half 2021 production. 

All told, Ford now expects to lose about 1.1 million units of production this year to the semiconductor shortage. 

The grim forecast follows Ford's announcement just last week when it said it would extend downtime at several North American factories amid the worldwide chip shortage.

The automaker's plants in Chicago, suburban Detroit and Kansas City, Mo., will be idled the weeks of May 3 and May 10. An SUV plant in Ontario will also take an extra week of downtime in early May.

Mach-E, F-150, Bronco Sport Sales Remain Strong 

Ford has been forced to cancel weeks of production at its two plants that make the F-150, the truck model that generates the bulk of the company's global profit.

Ford also faces headwinds from higher raw materials costs, in particular steel prices, which are up nearly 50% year to date. Ford also is ramping up its own battery production, meaning it will require other commodities that go into batteries. 

All that is limiting the number of cars and trucks Ford can sell to dealers. 

Ford last month said that its February U.S. sales fell 14.1% to 163,520 vehicles, though it still managed to steal market share from EV kingpin Tesla in the popular and lucrative SUV market, with strong sales of the Bronco Sport and fully electric Mustang Mach-E.

On that front, Ford said Wednesday that sales of the Mustang Mach-E, 2021 F-150 and Bronco Sport all added to profitable growth in North America.

Shares of Ford at last check were down 2.65% at $12.10. The stock is up about 42% year to date. 

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