What investors should know ahead of Q4 results

DETROIT – Shares of Ford Motor led the automotive sector in growth last year, soaring by about 140% thanks to a restructuring plan led by CEO Jim Farley. But the stock has stalled so far this year, down by less than 1%.

Investors will decide Thursday whether Ford can get any of that momentum back when the Detroit automaker reports its fourth quarter results and gives guidance for this year after the markets close.

Wall Street analysts estimate Ford will post a profit of 45 cents a share in adjusted earnings and a 6% rise in revenue from the previous year to $35.5 billion, according to Refinitiv estimates.

Ford’s fourth-quarter adjusted EPS is expected to be its second highest of the year, largely thanks to improved supply of semiconductor chips, which were in short supply throughout last year. Ford and other automakers were forced to sporadically shutter plants and depleted vehicle inventories due to the lack of chips.

While investors will be monitoring Ford’s quarterly results, they’re more interested in the automaker’s guidance for this year as well as any progress or setbacks in Farley’s Ford+ turnaround plan.

Here’s more on those issues and other things investors should know about ahead of Ford’s fourth-quarter results after the markets close Thursday.

Much of Wall Street’s focus for Ford, like other automakers, will be on the company’s guidance for 2022.

Automakers continue to manage through the global shortage of semiconductor chips, which some experts don’t expect to return to normal levels until late this year, if not 2023.

Ford’s crosstown rival General Motors surprised Wall Street by saying it expects its global production to increase by 25% to 30% in 2022 over last year. In October, Ford said it expected an increase in wholesale volumes, which are closely correlated with production, of just 10% in 2022.

GM reported full-year adjusted earnings of $14.3 billion, or $7.07 earnings per share,  on revenue of $127 billion in 2021. 

Analysts estimate Ford this year will earn between $1.54 and $2.35 earnings per share on revenue of $147.5 billion, according to Refinitiv. That compares with expectations of between $1.72 and $2.05 EPS and revenue of $126.3 billion in 2021.

Ford announced several special items and financing adjustments last month for the fourth quarter that could skew earnings if analysts didn’t adjust their forecasts.

The most notable item was a fourth-quarter gain of $8.2 billion on Ford’s equity investment when EV start-up Rivian went public.

The company also reclassified a $900 million profit on its equity investment in Rivian to a special item which will impact the company’s full-year adjusted earnings guidance. It was previously between $10.5 billion and $11.5 billion. Excluding that gain, the company’s 2021 guidance would be between $9.6 billion and $10.6 billion.

Ford owns about 12% of Rivian. It also bought $415 million in Rivian’s convertible notes in July that become common stock in June 2022.

Ford has not announced plans to sell its stake in Rivian. It’s something being closely monitored by Wall Street.

Several analysts downgraded the shares ahead of the earnings release.

RBC Capital Markets analyst Joseph Spak said it would be “more challenging” for the shares after the significant runup last year when he downgraded the stock from outperform to sector perform on Jan. 14.

Jefferies analyst Philippe Houchois also downgraded the stock in mid-January with similar comments.

“Ford is back, with strong earnings and a repaired balance sheet. Shares have also rerated on recovered earnings that now approach cyclical highs,” Houchois wrote in an investor note, adding “all that leaves limited scope for positive surprises.”

Ford is rated at overweight with a price target of $22.62 a share, according to average analyst ratings compiled by Factset.

Ford’s EV plans could come with some surprises for investors in 2022.

Ford is reportedly spending an additional $10 billion to $20 billion over the next five to 10 years converting factories worldwide to electric-vehicle production from making gasoline-powered cars, Bloomberg News wrote Tuesday.

Adding another $10 billion to $20 billion over the next decade wouldn’t be outlandish given automakers across the globe are pledging billions of dollars for such efforts through 2025.

An increasingly important number being watched by Wall Street is Ford’s vehicle order bank, which was at 139,454 orders when the company reported its third-quarter earnings in October. It’s unclear if that number includes its popular Bronco SUV, which are in the tens of thousands, an official told CNBC last month.

Farley has said the company plans to move more toward an order-based system rather than the traditional buying process of dealers having large inventories of vehicles that customers choose from and drive off the lot.

Farley has said the change assists Ford’s profits, reduces costs and ensures customers get the vehicle they want.

— CNBC’s Michael Bloom contributed to this report.