‘this is a very strong company’

Ford Motor Co. (NYSE: F) on Thursday said its Q4 results came in shy of Wall Street estimates as supply constraints made it difficult to meet strong demand. Shares are down 6.0% after-hours. 

Q4 results

Ford reported $12.30 billion in earnings ($3.03 per share) – a massive increase from last year’s $2.80 billion in loss (70 cents per share). Adjusted for nonrecurring items, it earned 26 cents per share.

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The legacy automaker recorded $37.7 billion in sales, up 5.0% YoY. According to FactSet, experts had forecast 45 cents of adjusted EPS on $41.2 billion in sales. On CNBC’s “Closing Bell”, Benchmark’s Michael Ward said:

No question it was a miss, it was disappointing. There were four metrics I was tracking in the quarter, they missed on three of those. One positive thing was they did provide record guidance for 2022, despite some of the ongoing chip concerns.

Future guidance

For the full financial 2022, Ford now forecasts its adjusted EBIT to fall in the range of $11.5 billion to $12.5 billion – up to 25% growth versus last year. Adjusted free cash flow is expected to stand between $5.5 billion and $6.5 billion this year.

Semiconductor shortages related to the pandemic will result in a hit of over 10% to vehicle wholesale volumes in the current quarter. Wholesales, however, will likely be up 10% to 15% for the full year. Ward added:

Over the next couple of years, the outlook for vehicle manufacturers in North America is better than ever. It’s the first time in history coming out of a downturn that the auto industry isn’t faced with the prospect of restructuring cost, revenue, or balance sheets. Ford is in great shape on all three fronts, and the underlying demand trends are more positive than I’ve seen in forty years.

Ford’s EV advantage

Ford now has over 275,000 orders for F-150 Lightning, Mustang Mach-E, and E-Transit commercial vehicles. The automaker is committed to fulfilling these as quickly as possible to penetrate the EV space, says CEO Jim Farley. As per Ward:

Market’s very focused on what Ford’s EV line-up is. They have the benefit of two of the strongest brand names in the marketplace; Mustang and F-150. So, that’s positioning Ford to be among the leaders in EVs over the next two to three years in the U.S.

Ford’s stake in Rivian

Sales were down 6.8% in fiscal 2021 as a whole. As of the end of Q4, Ford had $36 billion in cash, including its shrunken stake in Rivian Automotive that’s now worth $6.6 billion. Ward noted:

The value of Rivian distorts their balance sheet because it shows up in their cash and marketable securities. It had a big bum at year-end before ending at about $7.0 billion. If you take Rivian out and they’re generating another $5-$7 billion in surplus cash this year, so this is a very strong company.

Ward has a “buy” rating on Ford with a price target of $29 that represents a more than 50% upside from here.