Morningstar

Ford's First Quarter Likely as Good as It Gets for 2021

It expects the second quarter to have similar wholesale problems to a year ago, but this time due to the semiconductor shortage.

Securities In This Article
Ford Motor Co
(F)

Management expects Ford’s F first-quarter results to be the best quarter of 2021. Adjusted EBIT including Ford Credit of $4.8 billion was a record, and adjusted diluted EPS of $0.89 far surpassed the Refinitiv consensus of $0.21. We are leaving our fair value estimate of $15 unchanged. Management made no mention of resuming the dividend. It guided the second quarter as having similar wholesale problems to the second quarter of 2020, but this time due to the semiconductor shortage. We expect the dividend to be reinstated in the second half of the year. Ford’s automotive cash of $31.3 billion should enable the company to survive a rough second quarter still in solid financial health. In the second quarter of 2020, Ford burned nearly $5 billion, excluding Ford Credit, so a similar horrible second quarter does not permanently impair Ford, in our view. The second half of 2021, furthermore, should see a recovery.

The stock fell over 3% after hours on April 28, but we believe this decline isn't justified. The decline appears to be for Ford saying the rest of the year won’t be as good as the first quarter due to $2.5 billion of higher commodity costs year over year for the final three quarters. Further, management said the semiconductor shortage will cost the company $2.5 billion in EBIT and $3 billion of free cash flow for all of 2021. In February, Ford talked about lost 2021 EBIT from the shortage in a range of $1 billion-$2.5 billion. Excluding the shortage, management guided total 2021 EBIT of $8 billion-$9 billion. It now guides total EBIT of $5.5 billion-$6.5 billion, including the shortage. Therefore, the only change is Ford assuming the worst for second quarter. We don’t think this should be a surprise to the market. It’s been clear for a while that the shortage isn't going to resolve itself quickly, as it takes foundries a long time to add capacity. We agree with management that the second quarter will be the worst of the shortage’s impact, and its effects will continue into next year.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

More in Stocks

3 Dividend Stocks for October 2024

These three dividend payers have an average yield of more than 4.5%.
David Harrell

Consumer Defensives: Despite Angst, Thirsty Investors Have Names to Pursue

Estee Lauder, Kraft Heinz, and Dollar General are our top consumer defensive stocks.
Erin Lash, CFA

Industrials: Many Stocks Overvalued After Q3 Outperformance

Our top stocks in this sector are Chart Industries, Wesco, and CNH Industrial.
Brian Bernard, CFA, CPA

About the Author

David Whiston, CFA, CPA, CFE

Strategist
More from Author

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

Sponsor Center