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Ford’s ‘confusing’ 2021 guidance is hurting its stock despite blowout first-quarter earnings

DETROIT – Ford Motor easily beat Wall Street’s expectations for the first quarter despite an ongoing global semiconductor chip shortage causing low inventories and factory closures. So why are shares of the automaker down by as much as 10.4% during intraday trading Thursday?

The negative reaction by investors is a mix of issues related to the chip problem following Ford reporting its results after the closing bell Wednesday.

While analysts were thoroughly impressed with the company’s performance in the first quarter, which included a record $4.8 billion in adjusted pretax profits, they were far less impressed, if not confused, with its guidance for the year.

“Let’s just put it like this: Ford’s 1Q was far ‘too good’ to extrapolate while the remainder of the year is ‘too challenged’ to extrapolate,” Morgan Stanley analyst Adam Jonas said in a note to investors.

Here are five key takeaways from Ford’s first-quarter results and its 2021 guidance that investors should know about.

Guidance

RBC Capital’s Joseph Spak reiterated those comments, adding the guidance was “confusing” and it’s a “bit unclear” whether the depth of problems from the chip shortage is exclusive to Ford. Barclays analyst Brian Johnson described Ford’s operational turnaround being “dented” by its “puzzling” guidance.

Ford said the chip shortage would slash full-year earnings by about $2.5 billion – the high end of a previous guidance – before interest and taxes to $5.5 billion-$6.5 billion. In February, Ford initially set guidance of $8 billion-$9 billion without factoring in an expected $1 billion-$2.5 billion impact from the shortage.

But the reaffirmed guidance after a better-than-expected first quarter implies weaker results through the remainder of the year outside of the chip shortage, according to analysts.

Ford CFO John Lawler also described the $8 billion-$9 billion guidance before interest and taxes as a “launching pad” for 2022.

Underlying business

Worst to come

Farley’s promise

EVs

Deutsche Bank on Thursday reiterated a short-term catalyst call buy rating on Ford heading into the capital markets day. It also raised 2022 earnings per share for Ford to close to $2.

Ford earlier this year announced plans to increase its investment in EVs by $10.5 billion to $22 billion through 2025. That excludes potential spending on any battery plants.

The company announced plans Tuesday to “eventually” manufacture its own batteries and battery cells. However, the company declined to discuss a timeline to do so.

– CNBC’s Michael Bloom contributed to this report.

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