Ford Motor Company (NYSE:F) will report its fourth-quarter and full-year 2020 earnings results after the market closes on Thursday, Feb. 4. Will it outperform Wall Street's expectations?
What Wall Street expects
On average, Wall Street analysts polled by Thomson Reuters expect Ford to report an adjusted loss of $0.07 per share on automotive revenue of $33.84 billion.
Both results would be down from a year ago. Ford reported adjusted earnings of $0.12 per share on automotive revenue of $36.7 billion in the fourth quarter of 2019.
(Wondering what those terms mean? Here's the Ford secret decoder ring: Adjusted figures exclude one-time charges and credits. Automotive revenue excludes revenue from Ford Credit, the Blue Oval's financial services subsidiary.)
Why Ford might do better
Ford's fourth-quarter sales results were a mixed bag, with some strong results offset by ongoing COVID-19 effects and tight supplies of its top-selling F-150 pickups in the U.S.
- Ford's overall U.S. sales fell 9.8% in the fourth quarter, but its higher-profit retail sales fell just 3.4%. The key factor in that decline was a shortage of F-150s caused by factory shutdowns required to change tooling for the all-new 2021 model. That hurt, with overall F-Series pickup sales down 15%. But retail sales of Ford's SUVs were up 9.8%, led by strong results for the higher-priced Explorer and Expedition.
- Ford's sales in China jumped 30% from a dismal year-ago result, powered by a 75% increase in sales of higher-priced Lincoln models. Ford now makes the Lincoln Aviator and Corsair SUVs in China (as well as in North America). Demand has been brisk.
- Ford's sales in Europe were down 15%, as new pandemic-related restrictions in the United Kingdom and Germany hurt showroom traffic. But sales of Ford Europe's best-seller, the Focus, held up well, dropping just 2.8% from a year ago. Ford also sold almost 40,000 units of its new Puma, a small, sporty crossover SUV.
Expect some big one-time charges
Ford warned auto investors to expect some hefty one-time charges against its fourth-quarter earnings. These won't affect the "adjusted" figures, but they'll affect the bottom line. (Put another way: Ford will probably report a net loss for the quarter.)
Here are the charges we know are coming:
- $610 million to cover the costs of an airbag-related recall. This is a cash charge, meaning it's actual money that Ford is obliged to spend.
- About $1.5 billion related to its pension funds to account for the fact that the investments in the funds fell in value in 2020. This is a noncash charge, meaning it's just accounting, not actual money. Ford took a similar charge a year ago.
- About $2.5 billion related to the closure of three factories in Brazil. Noncash charges will probably account for more than half of that total, but there will be a cash component as well.
Will Ford's stock pop after earnings?
Here's my take: I think Ford will report OK-but-not-great operating results for the quarter because of the pickup shortage, and a net loss because of those one-time charges. I think there's a good chance that it will report a smallish per-share profit on an adjusted basis. That would beat Wall Street's estimate, but may or may not do much for the stock.
That said, I also think there's a good chance that Ford will give guidance for 2021 that is better than Wall Street currently expects, as its truck inventories get back to normal and its cost discipline starts to pay off. If so, that could definitely send the stock higher.
We'll find out on Thursday afternoon.