Ford (F) earnings Q4 2019

Earnings


DEARBORN, Mich. – Ford Motor lost $1.67 billion during the fourth quarter and missed Wall Street earnings expectations on increased pension contributions and higher North American warranty and labor costs.

Ford shares plunged by about 9% during after-hours trading Tuesday to about $8.30 per share. The company released its earnings after the markets closed.

The automaker disappointed Wall Street with its earnings projections for 2020. It’s projecting full-year earnings of between 94 cents and $1.20 a share, or adjusted earnings before interest and taxes of $5.6 billion and $6.6 billion.

The company made $6.4 billion in 2019, slightly below a revised forecast for the year following a botched launch of its redesigned Ford Explorer SUV. Ford expects adjusted free cash flow of between $2.4 billion and $3.4 billion in 2020.

The Dearborn, Michigan-based automaker last month said it would take a pretax hit of about $2.2 billion in the fourth quarter due to contributions to its employee pension plans and retirement benefits.

Here’s what Wall Street expected, according to Refinitiv consensus estimates:

  • Adjusted earnings: 12 cents per share versus 15 cents per share expected
  • Automotive revenue: $36.7 billion versus $36.49 billion expected

Ford CEO Jim Hackett during a call with investors on Tuesday described the company as being “at a crossroads” as it executes an $11 billion global restructuring plan through the early-2020s.

“Our leadership team is determined to return to world-class levels of operational execution,” he said. “We will do that without losing any momentum in creating a Ford Motor Co. that will thrive and generate long-term value in these fast, changing times.”

Tesla

When asked about Tesla’s roughly $160 billion valuation being nearly five times that of Ford following an ongoing record run by the company, Hackett touted progress made by the automaker regarding connected and electrified vehicles, including all-electric and plug-in hybrid models.

“The thing about Tesla, CEOs don’t ever talk from this table about competitors, but I have been really candid in the company since I came about what’s the business model that’s there and what, frankly, about it is attractive,” he said.

Hackett later used the new all-electric Mustang Mach-e as an example of the company’s progress since he took the reins of the company in May 2017.

“This product … lives in great respect for the Ford legacy, but as it respects it, it’s not in reverence, it’s not in such reverence that it can’t change. This vehicle is an iconic example of what we’ve been working on.”

‘Below expectations’

Ford CFO Tim Stone on Tuesday said last year’s earnings were “below our expectation,” but touted the company’s “ambitious” cost-cutting measures and ongoing improvements to products.

“The things that we’re doing in ’19 and ’20 set us up well for potential improvements in ’21,” Stone told media during a briefing of the quarter. He referred to forthcoming products such as a redesigned F-150 pickup, new Ford Bronco and a smaller SUV, commonly referred to externally as the “baby Bronco.”

Signing bonuses awarded to Ford’s hourly UAW members in the U.S. cost the automaker roughly $600 million in the fourth quarter. Stone declined to disclose the expected overall costs of the four-year deal.

Wall Street is paying close attention to the progress made under Hackett’s $11 billion restructuring plan as well as the automaker’s operations in China.

The company said it spent $3.2 billion on its restructuring in 2019, including $900 million in cash. Ford expects to spend an additional $900 million to $1.4 billion for the restructuring, including between $800 million and $1.3 billion in cash, in 2020.

China

In China, Ford lost $771 million last year, including $207 million in the fourth quarter. Stone declined to disclose when the company expects those operations, including localized production, to be profitable.

Hackett declined to discuss the impact the coronavirus outbreak is having on the automaker. The country has extended a temporary factory shutdown through many provinces to help contain the epidemic. Hackett said it will take “weeks to understand the implications of the outbreak.”

“Our Ford team is actively monitoring the situation on several fronts,” he said, referring to employee safety, logistics, supply chain management and other areas.

In October, Ford lowered its 2019 earnings guidance by $500 million to between $6.5 billion and $7 billion. Ford also shaved 3 cents off of the top range of its earnings per share forecast, to between $1.20 and $1.32 per share.

For 2019, Ford’s adjusted earnings were $6.4 billion, or $1.19 per share. Its free cash flow to end last year was $2.8 billion.



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