Ford Motor Co. (F) - Get Report shares moved higher in heavy volume Monday after analysts at Jefferies updated its model on the carmaker, and held its price target in check, following the group's warning last week that chip shortages will lead to a 1.1 million shortfall in 2021 vehicle production.
Ford, which smashed Street forecasts for its first quarter earnings with a bottom line of $3.3 billion -- the best in a decade -- on revenues of $36.2 billion, said the ongoing shortage in global semiconductors would cost it around $2.5 billion -- more than double its previous estimate -- and likely last until at least the first half of 2022. It also slashed its full-year adjusted earnings forecast to between $5.5 billion and $6.5 billion.
Ford said Monday, in fact, that it will scale-back production at German plants in Cologne and Saarlouis amid what it called "tense" semiconductor shortages.
"The contrast in the magnitude of both Q1 beat and guidance cut was a setback for Ford's recovering but still fragile credibility," said Jefferies analyst Philippe Houchois, who added that the carmaker's May 26 investor presentation will be a major test of 'Street cred' for CEO Jim Farley and his colleagues. "However it does not, in our view, change the fundamental investment case of a product and cost led turnaround."
Ford shares were marked 0.4% higher in early trading Monday to change hands at $11.60 each.
Houchois said the gap between the earnings beat, which he said shows "key progress in what is under management's control" and the cut in full-year guidance had rightly "spooked" investors, particularly given that production shortfalls put its 2021 forecasts closer to 2020 levels than 2019 levels.
However, he noted that "whilst cutting numbers normally comes easily to auto analysts, we find it difficult to get to guidance and reduce EBIT to $6.9 billion', adding that "with a few false starts, the Ford investment case has been testing but confidence in the mix of product and cost and overall modest changes to estimates we maintain our 'Buy' rating and $16 price target".