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DJ Ford's Earnings Show Its Turnaround Is Under Way -- Barrons.com

· 02/04/2021 17:06
By Al Root

Ford Motor turned in an unexpected fourth-quarter profit -- evidence that new CEO Jim Farley is gaining traction in turning around performance at the company -- while pledging to invest more in electric and autonomous vehicles.

At the same time, the storied car maker forecast higher earnings than Wall Street had expected for the current year. The combination of upbeat news sent the stock up about 2.6% in after-hours trading.

For the final quarter of 2020, Ford (ticker: F) reported 22 cents in adjusted per-share earnings from $36 billion in sales. Wall Street was looking for a loss of 7 cents per share from $36.8 billion in sales.

Ford's unadjusted result, under generally accepted accounting principles, was a loss of roughly 70 cents a share. Spending on restructuring, as well as pension accounting, explain the difference. Ford has a large pension obligation, and accounting practices require that the company value its pension assets at market levels, which can create big swings.

Earnings were solid at Ford North America. Ford Europe managed a quarterly profit, while losses at Ford China and Ford South America shrank compared with the third quarter of 2020. Ford Credit generated a fourth-quarter operating profit of about $900 million, up a little year over year.

Overall, the adjusted fourth-quarter 2020 numbers compare with the 12 cents in per-share earnings and $39.7 billion in sales reported in the fourth quarter of 2019. Sales haven't recovered fully from the pandemic, but Ford is making headway in improving its profit margins.

This year, Ford expects to earn about $7.6 billion in operating profit in 2021, excluding gains on some investments. That is about $500 million better than Wall Street was projecting before the news.

In 2021 and beyond, Ford announced plans to invest another $15 billion in electrification technologies, as well as $7 billion on autonomous driving technologies. That adds to, and updates, the company's 2018 plan to invest about $11 billion between 2018 and 2022.

General Motors (GM) for comparison plans to spend about $27 billion on both electrification and autonomous-driving technologies between 2020 and 2025.

The one watch item for Ford -- and Ford investors -- is a microchip shortage. The shortage has come up lately on a few conference calls and is affecting all auto makers, as well as other industries. Ford management says that if required, they will allocate microchips to the vehicles with the highest profit margins.

The company scheduled a conference call to discuss the result for 5 p.m. Eastern time.

Analysts and investors will want to hear more about restructuring, product launches -- including for the well reviewed, all-electric Mustang Mach E -- as well as more details about Ford's vehicle-electrification plans.

Barron's recently wrote positively about Ford, believing new management could improve profit margins and speed up the development of EVs. Since that article appeared, Ford stock is up about 25%, better than the 6% and 4% respective gains of the S&P 500 and Dow Jones Industrial Average over that time.

Write to Al Root at allen.root@dowjones.com

(END) Dow Jones Newswires

February 04, 2021 17:06 ET (22:06 GMT)

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