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Built Ford Tough? Stock Falls after Q1 Earnings and Q2 Guidance


Apr. 29 2020, Updated 10:12 a.m. ET

Ford (NYSE:F) reported its results for the first quarter of 2020 on April 28 after the market close. As expected, the earnings were disappointing. The company reported a loss of 23 cents per share compared to analysts’ expectations of a loss of 6 cents per share.

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Ford stock falls after dismal guidance

However, the results didn’t make the stock fall by 4% after hours. The company’s worse-than-expected second-quarter outlook, mainly due to COVID-19, impacted the stock. Ford expects its EBIT loss to be more than $5 billion in the second quarter compared to $0.6 billion in the first quarter. In the earnings call, CFO Tim Stone said, “Lower industry volume will be our biggest headwind this year.”

Focus on maintaining liquidity

Automakers will continue to focus on maintaining liquidity. In March, Ford decided to suspend its dividends, which amounted to $2.4 billion per year. The company also suspended its share repurchase program totaling $0.2 billion in 2019. The company has drawn over $15 billion in credit facilities. Meanwhile, Ford had a cash balance of $35 billion as of April 24. The company thinks that the cash should last it “through year-end, with no additional wholesales.” In a similar attempt to shore the balance sheet, General Motors (NYSE:GM) suspended its dividends and share buybacks to save cash.

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Ford plans to restart factories

Ford plans to do a phased restart of facilities in Europe starting on May 4. The company didn’t mention a timeline for restarting its US facilities. According to The Wall Street Journal, General Motors, Fiat Chrysler (NYSE:FCAU), and Ford target to restart US factories on May 18.

Self-driving services postponed until 2022

In another important announcement, Ford postponed the self-driving services to 2022. Due to COVID-19, the company reworked its go-to-market strategy. Ford is betting big on the electrification of its vehicles. The company has committed $11.5 billion toward electrifying its vehicle fleet through 2022. Ford also mentioned that while the impact of COVID-19 could cause some shifts in timing, it’s “really excited about our forthcoming launch of the redesigned F-150.”

While Ford might be able to navigate the coronavirus pandemic with its current liquidity position, investors are concerned about the company in the long term. During the Automotive News Podcast, Morgan Stanley analyst Adam Jonas said that Ford board members and top executives need to have a “strategic discussion” about consolidation or a merger.


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