Ford Q1 2021 Earnings Surpass Expectations: Chip Shortage to Cut Q2 Production by 50%

Ford Motor Company (NYSE: F) delivered a strong Q1 2021 performance, beating both earnings and revenue projections, while U.S. truck sales showed notable growth.

Source: Analyst consensus data from Visible Alpha

Highlights

• U.S. truck sales increased by 5.1% year-over-year, contributing to a 1% rise in total vehicle sales.
• Trucks now account for 53.2% of Ford's total unit sales, boosting average profit margins per vehicle.
• Adjusted earnings per share (EPS) soared to $0.89, exceeding estimates by over four times; revenue reached $36.2 billion, beating expectations by 3.7%.
• Ongoing semiconductor shortages, worsened by a fire at a key supplier, have prompted Ford to revise its outlook, anticipating significant production cuts in Q2.

In-Depth Financial Analysis of Ford (F) Q1 2021

Ford’s Q1 results showcased remarkable resilience, with adjusted EPS of $0.89 far surpassing the consensus estimate of $0.20. Revenue climbed to $36.2 billion, outperforming the forecasted $34.9 billion by 3.7%. This robust financial performance underscores Ford’s strong market positioning amid supply chain hurdles.

Focus on U.S. Truck Sales

Truck sales remain a critical driver for Ford’s profitability due to their higher margins. In Q1 2021, Ford sold 277,233 trucks, 216,899 SUVs, and 27,202 cars in the U.S. Total vehicle sales grew 1% year-over-year, with trucks up 5.1%, SUVs rising 14.3%, and cars declining 56.7%. These figures exceeded analyst predictions, highlighting strong consumer demand for trucks and SUVs.

Production Challenges and Future Outlook

Ford has faced production stoppages due to a global semiconductor shortage, exacerbated by a fire at Renesas, a major chip supplier in Japan. The company expects these disruptions to reduce full-year earnings before interest and taxes (EBIT) by approximately $2.5 billion.

Ford anticipates producing 1.1 million fewer vehicles in 2021 due to chip scarcity. Despite this, the company projects adjusted EBIT between $5.5 billion and $6.5 billion after accounting for the semiconductor-related impact.

Over the past 12 months, Ford shares have yielded a total return of 144.2%, significantly outperforming the S&P 500’s 43.6% gain.

Insights from Ford’s Q1 2021 Earnings Call

During the earnings call, Ford management shared key perspectives for 2021:

• Q1 is expected to be the strongest quarter for adjusted EBIT this year.
• Q2 is projected to incur losses and negative adjusted free cash flow due to reduced production from chip shortages.
• Production in Q2 is forecasted to be about 50% lower than planned, with a 10% reduction anticipated in the latter half of the year.
• Ford aims to offset Q2 setbacks with recovery in the second half of 2021.
• The semiconductor shortage may persist into 2022, continuing to challenge production.
• Positive factors include strong vehicle demand, investments in electric vehicle startup Rivian, and reduced risk of COVID-19 related shutdowns affecting sales.
• Rising commodity prices present an additional hurdle alongside chip supply constraints.

Upcoming Earnings Release

Ford's next quarterly earnings report is scheduled for release on July 28, 2021.

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