Ford Motor Company (F) on Q1 2021 Results - Earnings Call Transcript
Operator: Good day, ladies and gentlemen. My name is Holly, and I'll be your conference operator today. At this time, I would like to welcome you to today's Ford Motor Company First Quarter 2021 Earnings Conference Call. After the speakers' remarks, there will be a question-and-answer session. . As a remainder, today's call is being recorded. At this time, I’d like to turn the call over to Director of Investor Relations, Lynn Antipas Tyson. Lynn? Lynn Antipas Tyson: Thank you, Holly. Welcome, everyone, to Ford Motor Company's first quarter 2021 earnings call. Presenting today are Jim Farley, our President and CEO; and John Lawler, our Chief Financial Officer. Also joining us for Q&A is Marion Harris, CEO of Ford Credit. Jim will make some opening comments. John will talk about our first quarter results and guidance and then we'll turn to Q&A. Today's discussion will include some non-GAAP references. These are reconciled to the most comparable US GAAP measures in the appendix of our earnings deck, which can be found along with the rest of our earnings materials at shareholder.ford.com. Today's discussion includes forward-looking statements about our expectations. Actual results may differ from those stated. The most significant factors that could cause actual results to differ are included on Slide 24. Unless otherwise noted, all comparisons are year-over-year, company EBIT, EPS and free cash flow are on an adjusted basis, and product mix is volume weighted. A quick update on our upcoming IR events. I'm very pleased to announce that we will hold our Capital Markets Day on Wednesday, May 26. The webcast will open at 9:15 am and we will start promptly at 9:30 Eastern and end roughly at noon. We will share more information about the meeting later on this call and invitations will be sent out shortly. On Monday, May 3 Wells Fargo will host a fireside chat with John Lawler and Kumar Galhotra, President Americas and International Market Group. And on June 17, Deutsche Bank will host a virtual fireside chat with Jim Farley. Now I'll turn the call over to Jim. Jim Farley: Thanks, Lynn. Hello, everyone. Thanks so much for joining us today. Our first quarter of the year really defies an easy explanation or a pithy sound bite. But if I had to sum up one way, it would be this. We're executing on our plan. And I'm excited to say Ford is becoming a stronger, more resilient company that can deliver under pressure, manage risks and seize opportunities, all while generating consistent returns for our stakeholders. In the quarter, we earned $4.8 billion in adjusted EBIT. It's our best quarterly adjusted EBIT ever. And we achieved these results in the midst of a persistent global pandemic, and an unprecedented supply shock tied to the global semiconductor shortage. We mobilized the global team as we always do in these times of crisis. And we rapidly adjusted to the realities that we were seeing. Our team very skillfully navigated the supply constraints, through sharp yield management, and a relentless focus on turning around our automotive operations. That means improving our launch performance, improving our quality, enhancing our brand, strengthening our customer relationships, and improving our go-to-market execution. And Ford Credit, which in our view, is the best automotive finance captive in the industry, also delivered an outstanding quarter. John Lawler: Thank you, Jim. So heading into 2021, the run rate of our business was on track to deliver 8 billion to 9 billion in adjusted EBIT and that's up about 33% versus 2019. And that, of course, is all before the impact of global semiconductor shortage. So our confidence in the stronger run rate is built on the durable changes that we've made to improve our returns, improve our cash flow and of course provides us financial flexibility to invest in growth. And these improvements were embedded in our original 2021 outlook. Jim Farley: Thanks John. Before we turn it over to questions, I want to reiterate how proud I'm with this Ford team for its commitment to deliver on our plan, to fix automotive, to modernize the company, and to find ways to disrupt our business and the traditional auto industry to create value that will be rewarded - that will reward our stakeholders. On May 26, we will hold a virtual presentation for investment community where we plan to deep dive into our plan as Lynn said. We're going to cover how we're going to lead the electric vehicle revolution in areas that we're strong at Ford. Number two, we're going to build out our industry leading commercial vehicle business with products, but as well services that lead to growth and new revenue streams. And we're going to leverage our connected vehicles to transform the customer experience and truly shift Ford from a more traditional OEM to a company where the manufacture and sale of the vehicle is just the very first step, and then ever improving always on and far more rewarding customer experience. I so look forward to speaking to all of you soon as we continue our effort to create a Ford that can compete and especially win in this exciting new era of our industry. So with that, let's start the Q&A. Operator: All right. And our first question is going to come from the line of Rod Lache with Wolfe Research. Rod Lache: Hi, everybody. Can you hear me? Hello? Operator: Yes, we can hear you. Rod Lache: Okay. Look, I wanted to just maybe get a little bit more clarification on the guidance. I think everybody understands that the underlying guidance ex the semiconductor shortage impact isn't really changing. And I don't think anyone would react to that at all if it wasn't for how surprisingly strong Q1 was. You almost did $5 billion of EBIT, including the gain and $4 billion excluding it. So the numbers obviously are going to be pretty low for the rest of the year. I guess my questions on this are, was there first of all, an unusual gain on incentives for inventory at dealers in Q1? Could Q2 actually be as low as Q2 of last year? And then even more importantly, I was hoping you could talk a little bit about whether we can extrapolate anything from these kinds of numbers that you did a double-digit margin in North America, 5% Europe looks like some pretty good warranty improvement. So when the dust settles, what do you think we can pull out of this as we think about 2022? John Lawler: Yes. Hi, Rod. Thanks. Good afternoon. That's a lot there. Let me see if I can unpack that and do justice to the question. So as you said, the run rate to the business is $8 billion to $9 billion. And without chips, we clearly believe that's where we would be. And I think you're seeing come through the quarter a combination of things, as I said, in my remarks, you're seeing the strength of the underlying businesses improving and you're seeing that come through. You saw that in the redesign of our overseas operations. You saw that in warranty expense improving, right? Those are two things that we said we needed to improve in our business as we move forward through the redesign, and you're seeing that come through. You're also seeing the strength of our new products. Now, it's a little opaque, I think, for people to say, well, you also saw considerable pricing opportunity because of supply and demand imbalances. That is true. But so we go back and we look at what's happened with the pricing for our products, since we started the redesign, the refresh. And that's where we come back to. Since 2019, if you look at our price increases, our average transaction price increase compared to what's happened in the industry, our transaction prices have increased $1900 more than the industry. So that strength is flowing through. Now we had additional pricing opportunity in Q1 due to the supply demand and - supply and demand imbalance. And so that hit the quarter as well. We also saw a very strong mix in the quarter. As we had lower production, so we optimized the production to our higher margin and higher mix vehicles. So we saw that flow through as well. So you're seeing that combination happen and impact as in Q1. Now remember for the year, as we go through the year, we're also going to see a significant headwind from commodities. We saw very little commodity impact in Q1. That's because we still had our contracts from last year in place and we had our hedging. And so as we go through the year, we expect as contracts roll off, and we've seen the commodity prices increase primarily for aluminum, steel and in precious metals, we expect to see about a $2.5 billion increase in commodities Q2 through Q4. So that's going to hit us as we go through the rest of the year. We also won't have the non-recurrence of the $900 million Rivian gain. And we also expect that as we go through the quarter, and we get to more normalized levels of production albeit we said 10% lower in the second-half, we should start to see more and a gradual normalization of those incentives that we experienced in the first quarter the benefit of that. And then at Ford Credit, we did benefit again in the first quarter from the strong residual values and we do expect those to moderate as we go through the rest of the year. So we've taken all that into account as we've gone through. And I'd have to say that, what's encouraging to me and what the team has been able to do is we've been able to maintain the impact of the semiconductor chips to that high end of our range, the $2.5 billion, despite the volume impact growing significantly. Rod Lache: Yes. Thanks for that. Could you maybe - just to ask this a different way, the $8 billion to $9 billion guidance, excluding the semiconductor impact, that includes things like the inflation from commodities and so forth, it does include Rivian as well. But maybe you could just speak to at a high level, can we think about that $8 billion to $9 billion is kind of a launching point, if we wanted to think about bridging to next year? Is that sort of the run rate of profitability for the business? And there's obviously adjustments in warranty and South America restructuring, new product and things. Maybe you could just speak to that and how we should be thinking about the run rate of profitability? John Lawler: Absolutely, that is the run rate leading into next year. And we still have new products, Bronco, coming this year, the two and four door. We have some surprises Jim talked about, we have the F-150 Electric, we have the Transit Electric. So we have more products coming next year. We're going to continue to be aggressive. Our cost structure pushing that. And the other thing that we're learning coming out of this situation that we're in is how do you operate in a lean environment? And we've learned some quite a few good things about operating with leaner inventory. So I think there's opportunities there as well as we head into 2022. So absolutely, the eight to nine is a launching pad, we see that as a launching pad into 2022. Rod Lache: Okay. And just lastly, it sounds like there's some permanency to this transition to the lean inventory sales model. Could you speak to what kind of changes you're expecting here to distribution? John Lawler: So we've been doing quite a bit, of course, to get customers vehicles, to move people to more on order process, we've made changes to our processes to lower the gap between the time and order goes into the time we can deliver the order. And we're also seeing that as we look at making these types of changes to modernizing or improving our processes in a lower inventory environment, you get benefits across the patch, right? It would allow us to have lower capital required at Ford Credit, if we have to finance less dealer inventory for our dealers. That could free up some capital to invest in other growth areas. We would see better quality, because we'd have fresher vehicles and vehicles wouldn't be sitting on classes long. We'd have improved dealer profitability, because they wouldn't be financing that floor plan and we'd have lower incentives. We believe we'd have low incentives, because we'd have quick returning vehicles and we'd have higher orders. So as we're working through this lower inventory and these opportunities that we're seeing today, we're working on how we make them a normal part of our business as we go forward. Rod Lache: Okay. All right. Thank you. Operator: And our next question is going to come from the line of John Murphy with Bank of America. John Murphy: Good afternoon, everybody. I just wanted to follow-up on that line of reasoning. I mean, you guys are kind of apologizing in some ways for the good environment and what it's kind of forced you into in this lean inventory situation. Obviously, let's forget about the second, third and fourth quarter because they're going to be disrupted by the chip shortage. But I mean, you're seeing and you saw us in the third quarter of last year, these incredible margins, particularly North America, and then with the international one second, but that's being positive. I mean, you're kind of rolling off this list of things that have happened and that you may be able to maintain. Why wouldn't you maintain them and maintain this supply demand balance or imbalance as you call it, but really some people might say it's a great balance, and really focus on the higher mix vehicles and drive similar performance. I mean, we just seen it happen third quarter, fourth quarter, there was some launch costs, but you saw it happen in the third quarter, you saw it happen in the first quarter. I mean, why would it - why would you let it reverse? I mean, and obviously, there's some industry dynamics that are - other people are in the - other companies are in the same situation, but you yourselves are controlling this - can control this going forward on your product mix and what you do with your own production and it's produced wonderful results. I mean, why would you let it reverse? Jim Farley: We won't. Hi, it's Jim. I want to make it really clear John. That's not our intention. We're a smart team, we're running our business responsibly and there's real goodness here. This is - personally 10 years ago, I saw this industry go from 30-day supply way back up to 100 in 10 years, we're not going to let that happen. This is a better way to run our business, it's even more important now why? We get to move online. We get to use a reservation system with customers for most customers, when products are lean. We can simplify our sentence, we have the most complicated go-to-market system, I think on planet Earth. We could simplify all of that with tighter inventories. And it's better for the fitness. It also requires our industrial system to be more responsive. So no, I want to make it extremely clear to everyone, we are going to run our business with a lower day supply than we have had in recent past because that's good for our company and good for customers. John Murphy: Okay and investors too, which is important. And I guess as you think about the experiment or not the experiment of what you're executing in South America of backing away and putting just a few vehicles - supply a few vehicles into that market, it seems like Europe and China are kind of heading in that same direction. I mean, are you learning - I mean, I know its early days in South America, from that business plan. And I mean, and we're looking at Europe, that will be centered more around commercial vehicles, with maybe just a few easy passenger vehicles, and then China, which will be mostly Lincoln, and maybe some commercial vehicles. And then IMG, which is the Transit and the Ranger and that's it. And we'll see some stability in these international regions that hopefully will be profitable, but we won't always kind of be running around freaking out about whack a mole in one of the regions blowing up on us. It just seems like you're getting a handle on South America, you getting handle on these other regions. I mean, is this slimmed down product offering and maybe smaller size with more stability and better profitability really the direction that you're heading in these international regions? Jim Farley: Yes, we had a billion-dollar swing year-over-year. We've been at this for a long time in Europe. We're entering a new phase in Europe. So John, absolutely, the focus in Europe is in commercial vehicles and passion specialty passenger cars. In international markets it's the Ranger and derivatives of the Ranger. And in China, there's a - China like North America will have a more diverse product range than the other markets. But let's be really clear, we're doubling down on our iconic nameplates and building out a family of products. We just localized Explorer in China, it's doing great. Lincoln is profitable. I mean the growth rate in Lincoln in China and the profitability improvement as we localize to 90% as John said, it's been very encouraging to us. So in China and North America, we'll focus on these really passionate segments, where we think we naturally do well. But the big change is not just improving the profitability by simplifying where we compete. The big change in the company is going to be investing to an always on relationship with the customer. That is the real change at Ford. The change of simplifying our lineup and focusing on markets where we can be profitable is necessary. It's the important foundation. But what's sufficiency for us is to evolve into a different model with the customer. And you'll hear more about that in Capital Markets Day. John Murphy: It's great and just quickly on FMCC, obviously, reserves are probably going to stay stronger this year. I think you're probably being a little bit conservative there on your expectations. But if you also once again think about this focus on mix and price and not over producing, the net beneficiary also is FMCC. You mentioned the balance sheet being potentially a little bit smaller in the future as you can do more with less maybe everywhere. What is FMCC going to look like and I think we know, traditionally kind of think about $100 billion balance sheet. But it sounds like it might be somewhat smaller and have better returns and maybe more stability in it where are the net benefits in FMCC overtime as the strategy emerges. Marion Harris: Hey, John, it's Marion. I think you've covered a lot of it. We do see used vehicle prices being stronger throughout this supply shock. And so they're going to remain strong for quite some time, just as John said earlier. And I think that's going to provide a lot of support for new vehicle pricing as well. The 100 billion you mentioned is about size of the US balance sheet. The Ford Credit in total bear in that 130 billion this year. So we're down quite a bit. But it's all dealer for plan and so that's affecting - that's a downside to our profitability, but on the other side of it is the strong used car prices. John Murphy: Okay, but could that be somewhat structural going forward? Or you really think this as transitory through the course of this year? Marion Harris: At this stage, I'd say it's transitory. John Murphy: Okay, all right. Thank you very much. Operator: And our next question will come from the line of Colin Langan with Wells Fargo. Colin Langan: Great. Thanks for taking my question. I just want to step back. If we look at the semi-issue, do you think you're more impacted than the industry? We're just trying to understand if you lose 1.1 million, do you think you're able to recoup those in 2022? Or other competitors maybe kind of sweep in and take some of them because they have maybe a better supply chain? Just trying to understand, maybe you could kind of recoup that loss volume into next year? Jim Farley: Great question. Thank you, Colin. I would say it's difficult to make that judgment. If you look into change of inventory, which is I think, a great predictor of wholesale back in the quarter competitively. I think most of the major brands were impacted almost equally. So a lot of different news releases, a lot of different opaque data coming out. I can understand why you asked a question. We don't know yet, how this will play out competitively. But we do know, the first quarter actually played out a lot more evenly than maybe even we thought. As it goes on in the second half and into 2022, we're starting to grow in confidence that we can support our recovery volume, we think it's prudent to have the 10% in our planning, but we are going to work very hard to make sure that doesn't happen. It's just too early to tell. The Renesas impact we think is going to be largely finished by the second quarter, if they execute, and they're just in the middle of that right now. And so that kind of leads us back with the time when these foundries and how persistent that's going to be. And right now, I just think it's a little too early to declare what that's going to look like. But what we do know is the first quarter kind of turned out that most major players except for some of the companies who had buffer stock and saw this coming. They weren't affected. But I think Renesas now swept up almost everyone in the industry, just hard to tell how lumpy that's going to be across different brands. Colin Langan: No, thank you. That's a very helpful color. Just more strategically, you made the announcement on Ion Park yesterday. I mean, how should we be viewing this? I mean, is this an effort to make your own batteries? Or is this trying to build that expertise in house so you could provide that to your battery partners? I'm not sure if we should read more than to that announcement. Jim Farley: Thank you so much for asking this question. The answer is this is a very important announcement from Ford strategically. In the first inning we could buy off the shelf and cherry pick the technology and energy density and the cost. We've totally entered a different zone now, with our volumes - planned volumes going up so much. So we've already made the decision of vertically integrating the company. We're now building motors e-axles now. We've been writing our own battery management software for quite some time. And now it's time for us to lock in on the latest technology and to have a secure cell production relationship. There's no news to make today. But the reason why that Ion Park announcement is so important is because it's our place where we will learn. We will learn about with our partners how to transition to the very best in technology, energy density, the minerals, all the supply chain for batteries and cells, but also the manufacturability. And ultimately, I think to be competitive in this industry, a major brand like Ford will have to vertically integrate all the way through the system. It's just too early to make a bunch of announcements. But this is our dream team, who will be developing that capability in the company. Colin Langan: Okay, thanks for taking my questions. Operator: And our next question will come from the line of Joseph Spak with RBC capital markets. Joseph Spak: Thank you. Good afternoon, everyone. Actually I wanted to go back to something Rod brought up earlier. I know you mentioned 700,000 units out in the second quarter. Of course, we don't know what you were originally planning. So is it likely the second quarter looks similar to the second quarter of last year? And somewhat related to your point John, like the $2.5 billion headwind for the year is really just the high end of your prior range, but is the gross number higher? And that's been offset by other factors such as stronger pricing and maybe Ford Credit that bring it back down to that high end? Jim Farley: Yes, that's - thanks, great question. So it is similar to what we saw last year. We're going to lose about 700,000 units, which said was 50%, roughly 50% of the planned production we had. Maybe you look at second quarter of last year and it was very similar to that. And I would say, as we got into this - through the quarter, we have seen the team identify opportunities to offset more of the impact than we had originally thought. That's why we're able to contain a much higher miss on the volumes within that original guidance and so the teams have been working extremely hard to bring the goodness that we're seeing in the core run rate of the business through and then to find other opportunities, so absolutely, in both of those. Joseph Spak: Okay. And then second question - glad to hear the discussion about trying to keep dealer inventories more balanced. I guess the other lesson that could be learned here, and I'm curious Jim, whether you have any preliminary thoughts is, do you just need to - we've gone through a couple of these crisis, do you need to change how you think about assuring supply of key components including chips, and or that sort of keeping more inventory historically, maybe it's more direct buy and not relying on Tier 1s? And if so, maybe again, at a high level, how should we think about that practically working? Like, where in the value chain will that inventory be stored? And is that maybe a cost you're willing to incur for greater stability in the future? Jim Farley: Thank you. The answer is, yes. We have learned a lot through this crisis that can be applied to many critical components. That will be the essence of our new business, our modernized Ford, and it goes far beyond semi chips, there are other components that are really key enablers. It was very interesting for me, personally as the CEO, to talk to many of our colleagues in other industries and to find out how common buffer stocks are and how common direct buys are for the width of boundaries. Even if the company still buys the components with the chips on them from a supplier, they still negotiated a direct deal. These are all on the table of Ford right now, as you can imagine, yet we're also thinking about what this means for the world of batteries, and silicon and all sorts of other components that are really mission critical for our company and our capability. When I look at the company and what we need to vertically integrate, these are the areas. These are the areas we're going to bet on moving inside the company for core competency. And as we do that the supply chain becomes even more critical, but we also know more about it. So thank you for the question and you can imagine everything is on the table like you mentioned, from buffer stocks to direct deals with the foundries. Joseph Spak: Thank you. Operator: And our next question will come from the line of Ryan Brinkman with JPMorgan. Ryan Brinkman: Hi, thanks for taking my questions. Obviously, a standout performance in North America despite downtime and costs associated with the F-150 launch and the semiconductor shortage and a lot of moving pieces with regard to the guide and the rest of the year with the changes impacting the chip issue and now the Renesas fire, et cetera. So I thought maybe it would be great to just sort of zero in on your performance in the first quarter itself and get your thoughts on what a 12.3% North American margin in 1Q might imply for margin potential in a normalized environment. Kind of looking at the historical cadence of North America margin over the past five years or the five years ended in 2019. It seems like 1Q margin averages just about 40 BPS higher than the full year amount. And so maybe you're already operating in 1Q at almost a 12% kind of annual run rate. And that's amidst an F-150 launch and before any contributions from the Bronco. So how would you rate the underlying performance in North America? And does that performance in 1Q suggest once all the supply chain dust settles a stronger than targeted 10% regional margin? John Lawler: Thanks, Ryan. So I think we have to go back and just ground ourselves again, in that run rate of the business of 8 billion to 9 billion. And I don't want to get too far out ahead of ourselves on North America and what this quarter might mean for the run rate going forward. Given as you said, there's just a lot of moving parts within this quarter. I think the team's done a great job of managing through it. We really saw the 8 billion to 9 billion as the run rate heading into '22. We're going to do everything we can to continue to drive margin improvement, both here and overseas. And the team is focused and Jim's pushing us really hard to continue to modernize and improve the business in every place that we can. But as far as trying to predict coming out of this quarter what that means for the margin in North America in putting a number on the table. I'm not going to do that right now. Ryan Brinkman: Okay, thanks. Jim Farley: And Ryan just - it's Jim. Quickly, I'll be really quick. I've been in this business worked for different brands, I can't remember a time in my life, in my career, to have had so many hot products in one market like North America as Ford does right now. I mean, Mach-E sold out, Bronco Sport sold out, F Series sold out, Super Duty sold out, we have a very - our fresh new lineup is not only fresh, but it seems to be hitting the mark of the side case of the customer right now. And I don't know where that's going to take us. Yes, a really good question. I don't know where that's going to take us. But I do know it feels like we're going to be chasing demand for quite some time. Ryan Brinkman: That's helpful color. Let me ask just lastly, around the commodity inflation you're seeing and your ability to price for it. You've called out to 2.5 billion headwind for the year, you did take 3 billion of price in 1Q, although I'm cognizant, there's a lot that goes into that calculation including relative to new launches, et cetera. I think pricing is historically positive on launch models. Thankfully, as you mentioned, you have a lot of those this year, but it tends to be negative for carryover models, and I'm just thinking back to like, 2011, 2012 kind of coming out of the financial crisis in '08, '09 after a lot of final assembly capacity have been taken out every call you and others reporting on the relative anomaly of positive pricing on even no carryover model. So I'm just curious if we could see something similar now, say if the commodities headwind were to grow worse if the supply demand dynamic puts the industry in a position to pass really all the incremental costs on to the consumer or how do you see maybe the share of the burden taking place maybe the higher commodity is being - the cost of it being shared between yourselves versus the consumer versus suppliers, dealer margin. I don't know what you think. Jim Farley: Yes, I would say, we're definitely feeling the commodity headwind, as John said and inflation, it feels like we're seeing inflation in variety parts of our industry kind of in ways we haven't seen for many years. On the other hand, it feels like it's all due to a lot of one timers as the economy comes out of lockdown. So I think it's a bit too early to declare the run rate, where it's going to be, it's just too hard to tell from my standpoint. I will note though, based on your question that many of the vehicles that are supposedly ageing at Ford or normally would be ageing are still relatively new. Super Duty is relatively new, Explorer is relatively new. Yes, Escape - we have all the Lincoln lineup is brand new. So normally we wouldn't have so much new at the same time. And even the vehicles that are one or two years old are still relatively new in their segments. Ryan Brinkman: Very helpful. Thank you. Operator: Our last question for the day will come from the line of Emmanuel Rosner with Deutsche Bank. Emmanuel Rosner: So I'm still trying to better understand the $8 billion to $9 billion run rate, which is unchanged from your view earlier in the year. So let me try and ask it this way, did the first quarter earnings results play out as you had expected at the beginning of the year? And if it played out better, what are some of the expected offsets which are non-semi related that would prompt you to keep the same basis as the underlying profitability? John Lawler: No, the quarter did not play out as we originally expected, right. It came in much better, we did not expect that we would be able to more than offset all of the impact of the chips in the quarter, which was 17%, or about 200,000 units. So we saw incredible opportunity there from the industry wide supply and demand imbalance. So we saw pricing increase significantly. We also then, because of the supply imbalance, we really pushed hard on mix. So those were things that allowed us to improve the quarter. We did not expect to use vehicle prices to increase 14% in the quarter. And they did and that helped. And that was part of what's happened with Ford Credit and the performance of Ford Credit. And then as we go through the year Emmanuel, one of the things that did not hit us in the first quarter that's going to hit us through the rest of the year is the commodity cost increases that come in quite significantly through Q2 to Q4. So those are some of the things that are coming back and are going to come through in the second half of the year. And then the other thing is as production normalizes a bit and supply and demand comes worn balance, we do expect that we should see some of this pricing that we saw in the first quarter moderate a bit. And we should see some of that happen through the second quarter - through the second half of the year. Emmanuel Rosner: Is the commodities impact larger, much larger than you had though originally? John Lawler: When we had first looked at it, we thought it was going to be significant, somewhere between 1.5 billion to 2 billion. So it's slightly higher than where we had thought coming into the year. Emmanuel Rosner: Okay, and then follow up question. I find very impressive some of the improvement that you're showing in the first quarter in terms of net pricing and cost in some of the international markets and showing some good traction with the fitness initiative. I was hoping you could comment directly on Europe in particular around - and South America around the sustainability of some of these performance that we're seeing? How much you think is sort of market driven versus some of your own actions, both on the net pricing side, and also obviously on the cost side, the sustainability of those. John Lawler: Yes, so in Europe this is the second strong quarter that Ford of Europe is printed for us. And I think what you're seeing there is the redesign flowing through and showing up significantly again in this quarter. And of course, the market was aided a bit by what we're seeing the dynamics in this quarter, but the fundamental underlying strength of the business in Europe has improved. We took over a billion dollars of structural costs out as we relooked at the footprint. We've moved into commercial vehicles and improved our share there. We have a higher mix of utilities. All of that is providing a much stronger business for us in Europe. And you've seen that two quarters in a row now. Then when we look at South America, we reduced our volumes significantly and we improved our profitability. And that just comes back to the point that we brought to the market and we are and now we're going to focus on our higher margin vehicle or smaller footprint or smaller business down there leaning into Ranger in Transit, which are good vehicles in the market. And they're strong vehicles for us as a company and so you're starting to see that redesign really take hold. Emmanuel Rosner: Good to hear. Thank you very much. Operator: Thank you. And with that, we must conclude today's Ford Motor Company first quarter 2021 earnings conference call. We do appreciate your participation and ask that you please disconnect.
Ford Motor Company: A Strategic Investment in the EV Market
Ford Motor Company: A Value Investment in the Electric Vehicle Market
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Ford's financial health, as evidenced in the first quarter of 2024, shows a company in a state of steady growth and adaptation. With a revenue increase of 3% year-over-year to $42.8 billion and an adjusted per-share profit of $0.49 surpassing analyst expectations, Ford demonstrates resilience despite a 24% decline in net income to $1.3 billion due to rising expenses. This financial performance, combined with a generous dividend yield of 4.7%, underscores Ford's appeal as a long-term investment, especially for those interested in the burgeoning electric vehicle segment without the premium price tag associated with other brands.
However, Ford's journey is not without its challenges. The recent recall of over 242,600 Maverick trucks due to tail light illumination issues highlights the operational risks inherent in the automotive industry. This recall, necessitated by a software flaw in the Body Control Modules, could impact Ford's reputation and financials in the short term. Yet, the company's proactive approach in addressing the issue, including offering free software updates and mobile service options for affected customers, reflects a commitment to safety and customer satisfaction that could strengthen long-term investor confidence.
The current trading dynamics of Ford's stock, with a slight decrease to $12.43, reflect the market's short-term reactions to both internal and external factors. The stock's fluctuation within the day and its performance over the past year, ranging from a low of $9.63 to a high of $15.42, illustrate the volatility and opportunities within the automotive sector. With a market capitalization of approximately $48.51 billion and a significant trading volume, Ford remains a prominent player in the industry, navigating through operational challenges while capitalizing on growth opportunities, particularly in the electric vehicle market.
In summary, Ford's strategic positioning, financial performance, and proactive approach to challenges present a compelling case for investors. The company's affordable stock price, coupled with its potential in the electric vehicle space and commitment to shareholder value through dividends, makes Ford an attractive option for those looking to diversify their investment portfolios with a long-term perspective. Despite the recent recall and the slight dip in stock price, Ford's overall trajectory and business model suggest a resilient company poised for future growth.
Ford Shares Rise 3% Following Q1 Results
Ford Motor (NYSE:F) shares climbed over 3% pre-market today following the announcement of fiscal Q1/24 earnings that surpassed expectations, although revenue slightly missed projections.
The automaker reported first-quarter earnings per share (EPS) of $0.49, topping analysts' estimates of $0.42. However, revenue for the quarter was $42.8 billion, just shy of the expected $42.94 billion.
Looking forward to the full year of 2024, Ford's CFO, John Lawler, stated that the company's adjusted EBIT guidance remains stable, with anticipated results at the higher end of the $10 billion to $12 billion range.
Additionally, Ford adjusted its expectations for adjusted free cash flow upward, now forecasting between $6.5 billion and $7.5 billion, an increase from the prior estimate of $6 billion to $7 billion.
The company also narrowed its capital expenditures forecast for the year to between $8 billion and $9 billion, from a previous range of $8 billion to $9.5 billion, with spending expected to trend towards the lower end of this range.
Ford's Recall and Strategy Amid EV Market Slowdown
Ford Motor Company's Recall and Strategic Adjustments Amidst EV Market Slowdown
Ford Motor Company (F:NYSE) is currently addressing a significant recall affecting 456,565 vehicles across the United States, as mandated by the National Highway Traffic Safety Administration (NHTSA). This recall, encompassing models such as the 2021-2024 Bronco Sport SUVs and the 2022-2023 Maverick compact pickup trucks, is due to a low battery issue that could lead to a loss of drive power and malfunctioning of essential electrical accessories like hazard lights. To rectify this, Ford dealers are set to recalibrate the body control and powertrain control modules at no cost to vehicle owners. This proactive approach to addressing vehicle safety concerns is crucial for maintaining customer trust and loyalty, which can have a direct impact on the company's market performance.
In the broader context of the automotive industry, Ford, alongside General Motors (GM), is preparing to present its first-quarter results to investors. This period has been marked by a slowdown in electric vehicle (EV) growth, compounded by challenges such as global downturns in EV demand, increased competition, and rising borrowing costs in the U.S. These factors have led both companies to reassess their strategies, focusing more on their gasoline-powered vehicles, which continue to be their main profit generators. Despite these challenges, Ford's stock has shown resilience, with a slight increase to $12.085, reflecting a modest gain of $0.025 or approximately 0.21%. This stability in stock price, amidst a fluctuating market, underscores Ford's enduring appeal to investors.
Ford's financial health and market position are further highlighted by its current market capitalization of approximately $47.17 billion and a trading volume of about 26.92 million shares. The stock's performance over the past year, with fluctuations between a low of $9.63 and a high of $15.42, illustrates the dynamic nature of the automotive sector and Ford's ability to navigate it. The company's strategic focus on leveraging its combustion truck business and Ford Pro commercial vehicle operations, coupled with a cautious approach to EV investments, reflects a pragmatic response to the current market realities. By reaffirming its forecast for a core profit of $10 billion to $12 billion this year, Ford is signaling confidence in its operational strategy and financial outlook.
The automotive industry is at a crossroads, with the transition to electric vehicles presenting both opportunities and challenges. Ford's decision to slow down major electric-vehicle programs, making future EV investments contingent on profitability, is a calculated move to ensure sustainable growth. This strategy, while cautious, allows Ford to adapt to market demands and technological advancements without overextending its resources. As Ford and other automakers navigate the complexities of a shifting automotive landscape, their ability to balance innovation with financial prudence will be key to their continued success.
In conclusion, Ford's recent recall initiative and its strategic adjustments in response to the slowing EV market are indicative of the company's commitment to safety, customer satisfaction, and financial stability. By focusing on its strengths and adapting to market challenges, Ford is poised to maintain its competitive edge in the automotive industry. The slight increase in Ford's stock price, amidst these strategic maneuvers, reflects investor confidence in the company's direction and its potential for sustained growth.
Ford Motor Reports Strong Q4 Results, Shares Gain 4%
Ford Motor Company (NYSE:F) outperformed Wall Street forecasts with its fourth-quarter results and presented an optimistic outlook for the year ahead, causing its shares to rise by over 4% intra-day today.
The automaker announced adjusted earnings per share (EPS) of $0.29 on revenue of $46.00 billion, surpassing the expectations of analysts, who had projected an EPS of $0.12 on revenue of $43.04 billion.
For 2024, Ford set its sights on adjusted earnings before interest and taxes (EBIT) between $10 billion and $12 billion, with adjusted free cash flow in the range of $6 billion to $7 billion.
Ford Motor Falls 2% on UBS Downgrade
Shares of Ford Motor (NYSE:F) experienced a drop of more than 2% intra-day today. This decline followed a decision by UBS to downgrade the Detroit-based automaker's shares to a Hold rating from Buy, citing a view that the stock is now "more fairly valued."
UBS analysts, in their note, expressed a tempered outlook for Ford, indicating less optimism for the company's financial performance in the coming years. They specifically mentioned that they foresee more limited upside to Ford's earnings estimates for 2024 and 2025 than previously anticipated.
In terms of specific figures, UBS predicts Ford's earnings per share (EPS) for fiscal years 2024 and 2025 to be $1.70 and $1.65, respectively. These projections reflect a negative deviation of 4% and 12% from the current consensus.
The downgrade reflects broader industry challenges that Ford, like other automakers, is facing. These challenges include issues related to pricing, affordability, labor, and the need for significant investment, particularly in the context of transitioning to electric vehicles.
Ford Motor Reinstates Outlook, Shares Slightly Decline
Ford (NYSE:F) reinstated its financial outlook for 2023, forecasting an adjusted EBIT (Earnings Before Interest and Taxes) to be between $10.0 billion and $10.5 billion. Following this announcement, the company's shares saw a modest decline intra-day today.
The car manufacturer also revealed that its recent labor agreement with the United Auto Workers (UAW) in the U.S. is expected to bring about expenses totaling $8.8 billion over the contract's duration.
John Lawler, Ford's Chief Financial Officer, commented on the situation, noting the significant technological changes sweeping through the industry. He emphasized that some companies, both new and established, might not keep pace with these changes. Lawler affirmed the effectiveness of Ford's strategy, Ford+, highlighting the company's skilled team, disciplined capital allocation, consistent execution, and reduced cyclicality in growth and profitability.
The major cost drivers in the labor agreement are gross wages, expedited wage progression, and cost-of-living adjustments. By 2028, these factors are anticipated to add approximately $900 to the cost of each vehicle.
Ford had previously withdrawn its financial guidance for 2023 in late October due to a UAW strike affecting some of its operations in the U.S. For 2023, Ford is targeting an adjusted free cash flow in the range of $5.0 billion to $5.5 billion.
Ford Downgraded at Jefferies
Jefferies downgraded Ford (NYSE:F) from a Buy to a Hold rating and lowered their price target on the stock from $17.00 to $15.00. The decision came after Ford reported worse-than-expected losses in the electric vehicle (EV) segment and revised down their guidance for the Model e.
The analysts mentioned that while they appreciate Ford's efforts in disclosure and accountability, there seems to be no apparent change in the mid-term strategy. The focus on Gen 2 being software-centric and a concentrated line-up makes sense, but it will only become effective in 2026, leaving a less differentiated investment case in the years leading up to that point.
Ford updated its adjusted EBIT forecast to be in the range of $11-13 billion, which surpassed Jefferies' previous predictions of $9-11 billion. In response to the positive performance in H1 at Blue and the momentum at Pro, which outweighed the guided $1.5 billion deterioration in Model e, Jefferies raised its estimates to $11.9 billion, reflecting a 10% increase.
