Ford’s results smashed expectations. Why the stock is falling.

Ford's results exceeded expectations.  Why the stock is falling.

Ford Motor’s earnings again surprised positively and achieved better than expected profits in the first quarter. The result looks good, but the stock is down. The reason: The global semiconductor shortage is starting to worsen, causing Ford to reduce its profit forecast for the full year.

Ford (Ticker: F) was also able to depress earnings expectations in the fourth quarter. This time it was a little more difficult to accomplish this feat. The shortage of chips and the higher raw material costs made life difficult for all car manufacturers. The shortage showed in the numbers and the impact on the current quarter will be far greater.

For the first quarter, Ford Motor (Ticker: F) reported adjusted earnings of 89 cents per share on sales of $ 36.2 billion. Wall Street was targeting earnings of 22 cents per share on sales of around $ 36 billion. It’s a huge hit, but stocks are down about 3.3% in after-hours trading. At the time the earnings figures were released, Ford shares were up roughly 42%, far better than comparable earnings from the S&P 500 and the Dow Jones Industrial Average.

The semiconductor shortage affected Ford’s free cash flow. That is a cause for concern. Ford burned about $ 400 million in the quarter, in part because it got out with more unfinished cars. These effects should resolve themselves in the coming months when Ford ships vehicles to dealerships. In the US, retail car sales are booming and dealer inventories are low, which is contributing to soaring new car prices and record high used car prices.

CFO John Lawler told reporters that the company currently expects semiconductor availability “to get worse before it gets better”. Lawler said Ford expects the chip shortage to reach its worst point by the end of June, with shipments improving by the second half of 2021.

Most of the world’s major automakers have had to cut production of certain models due to the lack of computer chips, driven by increased demand for high-end computers and devices from consumers stuck at home amid the global pandemic last year.

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