Ford
’s
F
fourth-quarter 2020 results were quite a smasher. Not only did the U.S. auto giant post impressive earnings and revenues that beat estimates, it also announced massive investment plans in the electric and driverless market, which are set to boost its prospects and market position, going forward.
Earnings & Revenue Snapshot
Ford posted fourth-quarter 2020 adjusted earnings of 34 cents per share against the Zacks Consensus estimate of a loss of 7 cents. This marked the third straight earnings beat for the firm. Cost cut and restructuring efforts, primarily in the Europe market, led to the outperformance. Ford’s consolidated fourth-quarter revenues came in at $36 billion, down 9% year over year. Importantly, the company generated automotive revenues of $33.2 billion, which outpaced the Zacks Consensus Estimate of $32.9 billion.
Segmental Performance
For the fourth quarter, total revenues and wholesale volume in the
Ford Automotive segment
slid 9% each from the prior-year period to $33.2 billion and 1,238,000 units, respectively. However, its restructuring efforts and massive business improvement in Europe led to a whopping 484% surge in automotive EBIT to $1.25 billion.
In
North America
, revenues fell 13% year on year to $22 billion for the reported quarter. Wholesale volume contracted 21% from the year-earlier quarter to 540,000 units. However, EBIT surged 53.4% year over year $1,074 million, thanks to favorable pricing strategy and the absence of UAW contract ratification expenses.
In
South America
, revenues slipped 10% year over year to $0.9 billion for the fourth quarter. Wholesale volume dwindled 15% from the year-ago quarter to 63,000 units. However, the unit’s pretax loss narrowed from $176 million in the prior-year quarter to $105 million. Cost cut and rejig efforts helped it to counter weak industry demand and economic uncertainties.
In
Europe
, revenues edged up 1% year on year to $7.1 billion for the December-end quarter. While wholesale volumes tapered off 1% year over year to 339,000 units, it recorded the highest quarterly profit in the region in more than four years, thanks to aggressive restructuring initiatives. EBIT totaled $414 million, skyrocketing from $21 million registered in the corresponding quarter of 2019. It should be noted that the firm managed to lower annual structural costs by $1.1 billion via its restricting efforts in the region.
In
China
, revenues ebbed 17% year over year to $0.8 billion for the reported quarter. However, wholesale volume climbed 27% from the prior-year figure to 202,000 units and pretax loss narrowed from $207 million to $66 million for the quarter under review.
In the
International Markets Group
, revenues scaled up 5% from the year-ago figure to $2.5 billion. While wholesale volume tailed off 5% from the prior-year level to 93,000 units, pretax loss narrowed to $62 million from $174 million incurred in fourth-quarter 2019.
Fourth-quarter revenues from the
Ford Credit
unit declined 10% year over year to $2,723 million. Revenues from
Ford Mobility
came in at $13 million, down from $15 million recorded in the fourth quarter of 2019.
Financial Position
The Zacks Rank #1 (Strong Buy) company reported fourth-quarter adjusted free cash flow (FCF) of $1.9 billion, rising significantly from the year-ago figure of $498 million. Ford had cash and cash equivalents of $25,243 million as of Dec 31, 2020 compared with $17,504 million on Dec 31, 2019. Automotive long-term debt increased to $22,342 million on Dec 31, 2020 from $13,233 million in the corresponding period of 2019. You can see
the complete list of today’s Zacks #1 Rank stocks here
.
Outlook
Ford anticipates adjusted EBIT for 2021 between $8 billion and $9 billion, implying a significant uptick from the 2020 level of $2.8 billion. However, it should be noted here that this forecast doesn’t take into account the acute shortage of semiconductor supply that automakers are currently dealing with. Ford has been battling withsemiconductor supply deficit, which is hindering business operations in countries including the United States and India. As the company expects the global semiconductor shortage issue to prevail through first-half 2021, it is likely to affect near-term earnings. Ford anticipates semiconductor shortages to adversely impact the firm’s 2021 adjusted EBIT forecast to the tune of $1-2.5 billion. Despite the hurdles on the way, EBIT is expected to increase year over year by a considerable amount on rebounding vehicle demand. Meanwhile, adjusted FCF is envisioned in the range of $3.5-4.5 billion for 2021, suggesting a significant jump from $652 million recorded in 2020.
Ford’s Big EV Push
With electric and self-driving trends getting hotter with each passing day, Ford — which shares space with other auto biggies including
General Motors
GM
and
Tesla
TSLA
— is going the extra mile to demonstrate its prowess. In this regard, Ford has committed to spend $29 billion through 2025, which includes $22 billion in electric vehicles and $7 billion in autonomous vehicles. Its electric Mustang Mach-E, whose deliveries began late last year, is receiving positive reviews. The company’s E-Transit van will be available by late 2021, while the all-electric F-150 pickup is likely to hit the roads by mid 2022. The company believes that no-emission vehicles will be central to Ford’s Lincoln luxury brand and Transit commercial lineup.
Development and delivery of connected vehicles will get a major boost via its six-year partnership with
Alphabet
GOOGL
-owned Google.Per the alliance, employees from both the companies will be part of a new group called Team UpShift. This team will leverage Google’s services and data expertise to better streamline Ford’s operations, as well as create a more seamless experience for customers in order to aggravate the auto giant’s ongoing transformation.
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