Bruised Ford Down 4% After Hours On $5 Billion Loss Warning


Ford (F) has reported first quarter results in-line with prior guidance, but concerns over the company’s bleak outlook saw the stock pullback 4% in after-hours trading on Tuesday.

The company announced Q1 Non-GAAP EPS of -$0.23, GAAP EPS of -$0.50 and automotive revenue of $31.34B, down 15.8% year-over-year. For 2Q20, Ford expects to record an EBIT loss exceeding $5B, as year-over-year industry volumes decline significantly in every region.

Indeed, Ford estimates COVID-19 weighed by at least ~$2bn in EBIT for the first quarter. “Though, even if we adjust EBIT by that ~$2bn headwind, EBIT still lower -44% y/y” pointed out RBC Capital analyst Joseph Spak.

Following the earnings release, Spak reiterated his F Hold rating while slashing his price target from $6.50 to $5, indicating shares could drop a further 7%. Shares have already plunged 42% year-to-date, and the stock shows a bleak Hold consensus from the Street. (See F stock analysis on TipRanks).

“Ford secured enough liquidity to manage through the COVID-19 crisis, but cash flow outlook still mired and “surviving” came at cost to equity… Recent debt raise seems to be a mid-term permanent part of cap structure, eating away at cash flow and taking away from equity value” Spak said.

At the end of March, Ford’s cash balance was $34.3bn, and by April 24 the cash balance was $34.6bn. In between F raised $8bn in debt, so the weekly cash burn was >$2bn, calculates the RBC analyst.

Disappointingly, the company also announced that it has now postponed its self-driving project. “Given the challenges of the current business environment, as well as the need to evaluate the long-term impact of COVID-19 on customer behaviors, Ford made the decision to shift the launch of its self-driving services to 2022” Ford said.

At the same time, Spak believes several of the company’s new programs may now face delays. “We believe this could include the F-150 (also challenged by BWA transfer case plant damage) but also Bronco and Mach-E, among others” he said. Meanwhile Automotive News also had an unconfirmed report the Lincoln EV project with Rivian was cancelled.

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