Morningstar

First Quarter the Start of Ford's Coronavirus Woes

Ford’s first-quarter results suffered hard from COVID-19 and the worst is yet to come.

Securities In This Article
Ford Motor Co
(F)

Ford’s F first-quarter results suffered hard from COVID-19 and the worst is yet to come. First quarter adjusted diluted EPS was a loss of $0.23 which fell short of Refinitiv’s consensus of a loss of $0.12. Management understandably does not want, or have the visibility, to give guidance but did say it expects a second quarter adjusted EBIT loss of over $5 billion. That metric was a $632 million loss in the first quarter with at least $2 billion of lost EBIT from COVID-19. Second quarter 2019 total company adjusted EBIT was $1.65 billion. After factoring in a worse 2020 than already modeled, our fair value estimate falls by $1 to $8. We note though that there is much uncertainty around the cadence of production resuming so second quarter may end up being better than a loss exceeding $5 billion. First quarter free cash burn excluding Ford Credit was $2.4 billion.

Europe will start gradual production on May 4 and The Wall Street Journal recently said the Detroit Three may restart U.S. plants on May 18, but discussions are still ongoing with authorities and the UAW. China is already back to work but Ford will likely still lose money there. First quarter’s China loss was $241 million versus a $128 million loss in first quarter 2019. All segments lost money except Ford Credit and North America; the latter made $346 million versus a $2.2 billion profit in the prior year’s quarter. South America was the only segment which improved year over year, thanks to restructuring cuts, but it still lost $113 million.

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About the Author

David Whiston, CFA, CPA, CFE

Strategist
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David Whiston, CFA, CPA, CFE, is a strategist, AM Industrials, for Morningstar*. He covers stocks in the automotive industry, including dealerships, parts manufacturers, and automakers. He has covered the automotive industry since joining Morningstar in 2007. He writes stock reports, ad hoc reports, stock analyst notes, and builds discounted cash flow models for each company covered. He also assesses their economic moat and makes frequent television and print media appearances in local, national, and international news outlets. Key stocks covered include GM, Ford, CarMax, and all six publicly traded franchise auto dealers, such as AutoNation and Penske Automotive Group.

Before joining Morningstar in 2007, Whiston spent four years in PricewaterhouseCoopers’ New York real estate audit practice and one year in its Chicago office working on real estate acquisition due diligence, gaining experience around assessing an asset’s cash flow.

Whiston holds a bachelor’s degree in business administration with a concentration in accounting from the University of Richmond’s Robins School of Business. He also holds a master’s degree in business administration with concentrations in finance, economics, and organizational behavior from the University of Chicago Booth School of Business. He holds the Chartered Financial Analyst® designation, and he is a Certified Public Accountant and a Certified Fraud Examiner.

In 2012, he ranked first in the specialty retailers and services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey. He ranked first in the same industry in 2011 .

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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