From chip shortages to EVs: What investors should know ahead of Ford reporting Q4 earnings Thursday

Published Thu, Feb 4 20211:27 PM ESTUpdated Mon, Feb 8 20211:29 PM EST

Key Points

Shares of Ford Motor are up about 70% since Jim Farley became CEO on Oct. 1, led largely by optimism regarding his leadership and restructuring actions.
The company is set to report its fourth-quarter earnings and give guidance for the year after the market closes Thursday.
Things Wall Street will be watching for outside of the results and guidance include updates on its restructuring and EV plans, among other things.

DETROIT – Shares of Ford Motor are up about 70% since Jim Farley became CEO on Oct. 1, led largely by optimism regarding his leadership and restructuring actions. Whether Ford's fourth-quarter earnings and outlook for 2021 can add to the company's recent rally will come when Ford reports its results after the market closes on Thursday. Due to costs related to new or redesigned vehicle launches toward the end of the year, the company forecast adjusted earnings for the fourth quarter to be between break even and a $500 million loss. Average estimates of analysts compiled by Refinitiv expect Ford to report a fourth-quarter loss of 7 cents a share and $33.89 billion in revenue, a 7.6% decline compared with a year earlier. But much of the auto industry, including Ford, has outperformed Wall Street's expectations since last spring, when Covid-19 caused rolling plant shutdowns and dealership closures globally. Outside of Ford's earnings and guidance, Wall Street analysts will be looking for updates surrounding the automaker's $11 billion restructuring and EV plans. They'll also be interested in how an ongoing global semiconductor chip shortage is impacting operations. Here are more details on those issues as well as other things investors should know about ahead of Ford reporting its results after the market closes Thursday. 2021 A year ago, Ford disappointed investors with its 2020 guidance in addition to missing Wall Street expectations to end 2019. It's something Farley, who recently described 2021 as a "year of action" for the automaker, will likely not want to repeat. Deutsche Bank and Barclays last month made positive comments to investors regarding Ford's product plans, leading to optimism about its guidance for 2021 "We see potential catalysts occurring in the coming months, including a solid 2021 outlook on its 4Q earnings call (2/4), the launch of a number of key models under its new executive leadership team, and Capital Markets Day in the spring where Ford could reboot its redesign program and present a new EV strategy," Deutsche's Emmanuel Rosner wrote in an investor note. Deutsche added a catalyst call short-term buy idea on shares of Ford. The firm kept its long-term hold rating on the stock. EVs Much of Wall Street's recent criticism of Ford has centered on its lack of all-in commitment to electric vehicles. Instead, the company has launched hybrids and plug-in hybrid electric vehicles that continue to have traditional internal combustion engines in addition to new EVs. Farley recently told CNBC that he has "no regrets" about the automaker's hybrid models, but described such vehicles as transitional technologies on the way to EVs. Many believe hybrid vehicles assist in introducing customers to EVs and regionally make sense for some customers more than all-electric at this point, including increasing demand for such models in Europe. Farley said he plans to "lay out the entire picture" for Ford in the coming months, but investors will be listening to him today for any more specific plans regarding EVs. 'Aspiration' Wall Street analysts also likely will question Farley on fully transitioning Ford to EVs following General Motors last week announcing an "aspiration" to do so by 2035. Without mentioning GM by name, Farley several times during a recent interview with CNBC criticized GM for its announcment. "It's stunning how fast our industry is transforming," Farley said a day after the GM announcement. "And there's a lot of PR messaging going out, right? A lot of announcements, a lot of aspirations and our time to act is now … So, I just want to emphasize that you know that maybe the difference between a lot of the aspirations and a lot of the real commitments is there." Led by Executive Chairman Bill Ford, the automaker has been steadfast in its support for reversing climate change. Most recently, it went against former President Donald Trump and sided with California on meeting stricter emissions regulations than federally mandated, leading to a lawsuit between the state and former administration. That compares to GM, which sided with Trump, until deciding to withdraw its support weeks after Joe Biden was elected president. GM announced its 2035 goal as part of a plan to be carbon-neutral by 2040 a day after Biden signed a series of executive orders that prioritize climate change across all levels of government and put the U.S. on track to curb planet-warming carbon emissions. $11 billion restructuring As of the third quarter of last year, Ford was less than halfway through its $11 billion restructuring that was initially announced as a five-year plan in 2018. The company last month said it was ending manufacturing in Brazil as part of the plan, which would result in $4.1 billion in pretax charges, including $2.5 billion in cash. Farley has been building upon and "accelerating" those plans, which were started under his predecessor Jim Hackett, who was criticized by many for a lack of urgency and transparency with investor. Investors will be watching and listening for any additional actions as well as progress on the company's ongoing restructuring. Chip shortage Ford on Thursday said it is significantly cutting production at plants in Michigan and Missouri that produce its profitable F-150 pickup trucks due to a global semiconductor chip shortage. Automakers and parts suppliers began warning of a semiconductor shortage late last year after demand for vehicles rebounded stronger than expected following a two-month shutdown of production plants due to the coronavirus pandemic. Investors will want to know the impact of the cuts as well as how the shortage is expected to impact the automaker in 2021. Kumar Galhotra, Ford president of the Americas and international markets, described the chip shortage earlier this week as a "very dynamic situation." He said the company has been working with its suppliers to mitigate impact to its plants and resolve the issue as quickly as possible. "It's changing all the time, but we think we will be dealing with it for at least the first half of this year," he told CNBC. The production cuts come at an inopportune time for Ford, which had been ramping up production of a redesigned version of its F-150 since late last year. $610 million recall Ford last month confirmed it would recall 3 million older vehicles due to potential issues with their airbag inflators, costing the automaker an estimated $610 million. Ford said the expense will be treated as a special item as part of its fourth-quarter earnings. That means it will not impact Ford's adjusted earnings before interest and taxes or adjusted earnings per share – closely watched items by Wall Street. The recall followed the National Highway Traffic Safety Administration denying a 2017 petition by Ford seeking to avoid recalling the vehicles with the potentially dangerous airbags, which were produced by auto supplier Takata. Takata airbag inflators have been an ongoing issue for automakers for years. The defect can cause air bag inflators to rupture, sending potentially deadly metal fragments flying in the vehicle. — CNBC's Michael Bloom contributed to this report.

Incoming Ford CEO Jim Farley (left) and Ford Executive Chairman Bill Ford Jr. pose with a 2021 F-150 during an event Sept. 17, 2020 at the company's Michigan plant that produces the pickup.

Michael Wayland | CNBC

DETROIT – Shares of Ford Motor are up about 70% since Jim Farley became CEO on Oct. 1, led largely by optimism regarding his leadership and restructuring actions.

Whether Ford's fourth-quarter earnings and outlook for 2021 can add to the company's recent rally will come when Ford reports its results after the market closes on Thursday. Due to costs related to new or redesigned vehicle launches toward the end of the year, the company forecast adjusted earnings for the fourth quarter to be between break even and a $500 million loss.

Average estimates of analysts compiled by Refinitiv expect Ford to report a fourth-quarter loss of 7 cents a share and $33.89 billion in revenue, a 7.6% decline compared with a year earlier.

But much of the auto industry, including Ford, has outperformed Wall Street's expectations since last spring, when Covid-19 caused rolling plant shutdowns and dealership closures globally.

Outside of Ford's earnings and guidance, Wall Street analysts will be looking for updates surrounding the automaker's $11 billion restructuring and EV plans. They'll also be interested in how an ongoing global semiconductor chip shortage is impacting operations.

Here are more details on those issues as well as other things investors should know about ahead of Ford reporting its results after the market closes Thursday.