Ford’s Earnings Took a Huge Hit From Rivian. Wall Street Is Happy Anyway.

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Ford Motor

reported first-quarter earnings that modestly beat Wall Street estimates. The outperformance wasn’t big, but the quarter looks drama free, and that was enough for investors during a drama-filled year.

Ford (ticker: F) reported per-share earnings of 38 cents and an operating profit of $2.3 billion from $34.5 billion in sales. Wall Street was looking for EPS of about 37 cents and an operating profit of $2.1 billion from $34.5 billion in sales.

Shares are up.

Ford’s operating profit margin in its North America division came in at 7.1%—the same margin as the fourth quarter of 2021. That is an accomplishment given rising costs and supply-chain snarls.

A year ago, the auto maker reported EPS of 89 cents and operating profit of $4.8 billion from $36.2 billion in sales. That quarter included gains on Ford’s stake in

Rivian Automotive

(RIVN).

Ford marks its stake to market every quarter, so Ford had to recognize a loss of $5.4 billion related to Rivian based on the EV maker’s value at the end of March. Rivian shares closed the year at about almost $104 but ended the first quarter at about $50.

Ford owns about 102 million Rivian shares.

The charge is large, but it isn’t a surprise. Rivian stock hasn’t stopped falling either. It closed Wednesday at $31.22 a share. Analysts and investors have sold more speculative, high-growth stocks in response to rising interest rates, which reduce the current discounted value of future profits. Rivian has also had its own issues ramping up production.

Ford’s full-year 2022 guidance wasn’t changed in its earnings release. Back in March, Ford management said 2022 operating profit would fall between $11.5 billion and $12.5 billion and that free cash flow would come in at about $6 billion.

Ford stock was up 2.6% in after-hours trading after rising 0.5% to $14.78 in the regular session. The S&P 500 and Dow Jones Industrial Average both rose about 0.2%. Through Wednesday, Ford stock was down about 29% year to date.

Most auto stocks have struggled. and General Motors (GM) shares, for instance, are off about 34% year to date. First-quarter earnings are turning out to be better than feared.

Tesla

(TSLA) reported first-quarter EPS of $3.22, while Wall Street was looking for closer to $2.30. GM reported a profit of $2.09 a share; analysts were projecting $1.65.

For all of 2022, Wall Street’s forecasts are still trailing behind Ford’s guidance. Before the latest figures came out, analysts were projecting about $11.2 billion in operating income and $4 billion in free cash flow, according to FactSet. Analysts’ calls aren’t typically that far below management guidance.

GM, for instance, is projecting 2022 operating profit will fall between $13 billion and $15 billion. Wall Street expects is currently projecting GM operating profit to come in at $13.8 billion. That gap between what analysts expected and what management has now said is one factor that could help Ford stock Tuesday.

Options markets imply the stock will move about 9%, up or down, following earnings. Shares have moved about 7% or 8%, up or down, on average after the past four quarterly reports.

Ford management scheduled a conference call at 5 p.m. Eastern time to discuss the results. Analysts and investors will be eager to hear about production rates for the balance of the year given the industry’s supply-chain problems.

A shortage of semiconductors has constrained global auto production for more than a year. Ford delivered about 432,000 vehicles in the U.S. during the first quarter of 2022. A year ago, in the first quarter of 2021, that number was about 531,000.

Write to Al Root at [email protected]