the stock was hammered on Wednesday, but the reason for the fall is not obvious. Maybe
simply made investors count too much.
Ford shares fell 7.9%, far worse than the fall of 1% in both
Dow Jones Industrial Average.
It was the stock’s worst day since April 29, 2021. Shares fell more than 9% on the day investors invested in the news of semiconductor shortages and disappointing – and confusing – year-round financial guidance from the US automaker.
Confusion over guidance can also be the core of Wednesday’s big fall.
In a press release Tuesday night, Ford announced a number of special fees that investors should expect when the company reports fourth-quarter figures in early February. The headline from Tuesday’s press release was a $ 8.2 billion gain in the fourth quarter at Ford’s
(RIVN) investment. Ford owns around 100 million shares in the manufacturer of electric trucks. Most of the other items in Tuesday’s release qualify as accounting details.
However, Ford updated its full-year financial guidance, and that may be what investors reacted to.
“Ford wants to reclassify its [roughly] $ 900 million non-cash gain in the first quarter of 2021 on
investment as a special item – a step Ford said in October that it would take after Rivian’s listing, “it says in part of the release. “The reclassification means that the gain from the first quarter of 2021 will not be included in Ford’s full-year adjusted EBIT [earnings before interest and tax] or adjusted EPS. ”
It’s a mouthful, but essentially, Ford’s guidance for 2021 operating profit is now $ 9.6 billion to $ 10.6 billion. That’s $ 900 million less than the $ 10.5 to $ 11.5 billion old range. Although it seems like a guidance cut at first glance, Ford actually only moved around $ 900 million.
There is an explanation for the share fall on Wednesday. Ford also noted special items for debt retirement, tax accounting and retirement accounting. The net of all the other charges is a gain of about $ 5.4 billion. Another big number, but nothing that has much to do with the company’s long-term value, cash holdings or ongoing business operations.
In the end, it may have been too much for investors to get their minds around, giving Ford shares some uncertainty. And one thing investors hate is uncertainty.
Write to Al Root at firstname.lastname@example.org