Ford’s earnings got a huge hit from Rivian. Wall Street is happy anyway.
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Ford shares have moved around 7% or 8%, up or down, on average after the last four quarterly reports.
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Ford Motor
reported first-quarter earnings that modestly beat Wall Street’s estimates. The excess return was not great, but the quarter looks drama-free, and that was enough for investors in a drama-filled year.
Ford (ticker: F) reported earnings per share of 38 cents and an operating profit of $ 2.3 billion from $ 34.5 billion in sales. Wall Street was looking for EPS of around 37 cents and an operating profit of 2.1 billion dollars from 34.5 billion dollars in sales.
The shares are up.
Ford’s operating profit margin in the North America division came in at 7.1% – the same margin as in the fourth quarter of 2021. This is an achievement given rising costs and the tightening of the supply chain.
A year ago, the automaker reported an 89-cent EPS and an operating profit of $ 4.8 billion from $ 36.2 billion in sales. That quarter included gains on Ford’s stake in
Rivian Automotive
(RIVN).
Ford marks its stake in the market every quarter, so Ford had to acknowledge a $ 5.4 billion loss related to Rivian based on the electric carmaker’s value at the end of March. Rivian shares ended the year at around $ 104, but ended the first quarter at around $ 50.
Ford owns around 102 million Rivian shares.
The charge is great, but it’s not a surprise. The Rivian share has also not stopped falling. It closed Wednesday at $ 31.22 per share. Analysts and investors have sold more speculative stocks with high growth in response to rising interest rates, which reduces the current discounted value of future profits. Rivian has also had its own problems with increasing production.
Ford’s full-year 2022 guidance was not changed in the earnings report. Back in March, Ford management said operating profit for 2022 would fall between $ 11.5 billion and $ 12.5 billion, and that free cash flow would come in at around $ 6 billion.
Ford shares were up 2.6% in after-sales after rising 0.5% to $ 14.78 in the ordinary session. The S&P 500 and Dow Jones Industrial Average both rose around 0.2 percent. On Wednesday, Ford shares were down around 29% so far this year.
Most car stocks have worn out. and General Motors (GM) shares, for example, have been reduced by approx. 34% so far this year. Earnings in the first quarter turn out to be better than feared.
Tesla
(TSLA) reported first-quarter EPS of $ 3.22, while Wall Street looked closer to $ 2.30. GM reported earnings of $ 2.09 per share; analysts estimated $ 1.65.
For the entire 2022, Wall Street’s forecasts still depend on Ford’s guidance. Before the latest figures came out, analysts projected around $ 11.2 billion in operating revenues and $ 4 billion in free cash flow, according to FactSet. Analysts’ conversations are usually not that far under management’s guidance.
GM, for example, estimates that operating profit in 2022 will fall between $ 13 billion and $ 15 billion. Wall Street expects GM’s current operating profit to reach $ 13.8 billion. The gap between what analysts expected and what management has now said is a factor that could help the Ford stock on Tuesday.
Option markets suggest that the stock will move around 9%, up or down, after earning. Shares have moved around 7% or 8%, up or down, on average after the last four quarterly reports.
The Ford management scheduled a conference call at 5:00 p.m. Eastern Time to discuss the results. Analysts and investors will be eager to hear about production rates for the rest of the year given the industry’s supply chain problems.
A shortage of semiconductors has limited global car production for more than a year. Ford delivered around 432,000 vehicles in the United States during the first quarter of 2022. A year ago, in the first quarter of 2021, the number was around 531,000.
Write to Al Root at allen.root@dowjones.com
