Ford Stock Sinks After Slashing Q2 Production Targets On Chip Shortage That May Last Through 2022


Ford Motor (F) crushed first-quarter estimates but said it’ll halve second-quarter production due to the global chip shortage. Ford stock tumbled Thursday.


The report is the first from top automakers. General Motors (GM) and Volkswagen (VWAGY) are due next week. Meanwhile, Chinese EV company Nio (NIO) reports Thursday.

Ford Earnings

Estimates: Wall Street expected Ford to swing to EPS of 16 cents from a net loss of 23 cents per share a year ago. Automotive revenue was seen falling 0.7% to $31.13 billion, according to Zacks Investment Research.

Results: EPS of 89 cents on automotive revenue of $33.55 billion. Adjusted EBIT of $4.8 billion included a noncash gain of $902 million on Ford’s investment in Amazon (AMZN)-backed Rivian. Adjusted free cash flow was negative $396 million, due in part to higher inventory from the semiconductor issue.

Ford grew Q1 sales 1% in the U.S., 8% in Europe and 73% in China, marking the fourth straight quarter of growth in the world’s largest car market and lapping the pandemic hit in the year-ago quarter. Also in Q1, Ford sold 6,614 Mustang Mach-E electric crossover vehicles in the U.S., up from just 3 in Q4.

Outlook: CFO John Lawler said the chip shortage will get worse before it gets better and sees it bottoming out during Q2, with improvement through the remainder of the year.

Ford expects to lose about 50% of its planned Q2 production, up from 17% in Q1. The chip shortage may not be fully resolved until 2022, warned Ford, which expects to lose 10% of planned second-half 2021 production. For the year, the company sees 1.1 million units of lost production.

Ford still expects 2021 adjusted EBIT of $5.5 billion-$6.5 billion. That includes an adverse effect of about $2.5 billion from the chip issue, at the high end of its prior forecast. However, given the strong Q1 performance, Ford maintaining 2021 targets suggests some weakness for the rest of the year.

It expects to generate $500 million-$1.5 billion in adjusted free cash flow for the year, down from a prior view for $3.5 billion-$4.5 billion.

Stock: Shares dived 7.7% to 11.48 in Thursday stock market action. Ford stock is now forming a double bottom with a 13.09 buy point, according to MarketSmith chart analysis. But that W-shaped base looks awkward with shares undercutting the April 21 low.

GM stock dropped 3%.

Ford stock rallied massively in the past year. Investors cheered the No. 2 U.S. automaker’s pledge to nearly double spending to build EVs, to $22 billion by 2025.

IBD Live: A New Tool For Daily Stock Market Analysis

Battery Move Lifts Ford Stock

On Tuesday, Ford stock rallied after the company said it would ramp up battery R&D as it plans to make its own EV batteries, playing catch-up with Tesla (TSLA), VW and GM. Plans include a dedicated 150-member team and $185 million for a battery R&D center in Michigan, called Ford Ion Park.

Ford’s Mustang Mach-E electric SUV is a hit in the U.S. and will soon start selling in China, challenging the Tesla Model Y in both markets. An all-electric Ford Transit van goes on sale late this year. The all-electric Ford F-150 pickup truck follows by mid-2022.

Last month, Ford revealed it would partner with Nio to give Mach-E buyers in China the option to plug into Nio’s charging network.

But in the short term, the chip shortage will continue to weigh on earnings and Ford stock.

Ford confirmed April 26 that the shortage will force it to idle a Chicago factory until at least May 14. The plant, which makes the popular Ford Explorer and Lincoln Aviator SUVs, first shut down on April 12. Ford is also idling plants until May 14 in Flat Rock, Mich., and Kansas City.

After Hours: 10 Earnings Movers Near Buy Points; Biden On Tap

General Motors also is idling plants due to the shortage, including factories that make popular SUV models.

The chip crunch has hit automakers across the board and could last until 2022, some reports suggest.

The global auto industry could lose $61 billion and up to 2.5 million vehicles of production this year if the trend continues, according to the consulting firm AlixPartners. Volkswagen was unable to build 100,000 cars due to the shortage and is now warning of a worsening hit to output.

Find Aparna Narayanan on Twitter at @IBD_Aparna.


Is Ford Stock A Buy Right Now? Here’s What Earnings, Charts Show

Is Nio Stock A Buy Right Now As Chinese Electric Cars Boom?

Looking For The Next Big Stock Market Winners? Start With These 3 Steps

Find Today’s Best Growth Stocks To Watch With IBD 50

IBD Digital: Unlock IBD’s Premium Stock Lists, Tools And Analysis Today