Ford Motor’s shares slid after it reported fourth-quarter earnings Thursday that significantly missed Wall Street’s earnings expectations and slightly missed on revenue.
The sour response to Ford’s results presents a challenge to Chief Executive Jim Farley. Who is trying to accelerate the company’s pivot toward electric vehicles?
Ford said it has 275,000 orders for its electric F-150 Lightning, Transit vans, and Mustang Mach-E utility vehicles. It expects to double electric vehicle production capacity to 600,000 vehicles a year by 2023.
Chief Financial Officer John Lawler said during a call with reporters that Ford expects 2022 earnings before interest and taxes to grow by 15% to 25%, outpacing the predicted 10-15% increase in vehicle production. Ford should hit an 8% pretax profit margin this year, a year ahead of schedule, he said.
Financial Highlights
For the quarter, Ford’s North American operations, as they have been, contributed the most to the automaker’s earnings, up by 68% to $1.8 billion compared to a year earlier. International losses included $150 million in China, down 130%, and $159 million, a 139% decline, in Europe.
For all of 2021, Ford reported an operating profit of $10 billion, and an operating margin of 7.3% for the year. Full-year net income of $17.9 billion included a gain on its investment in Rivian.
Fourth-quarter net income rose to $12.3 billion from a $2.8 billion loss a year ago. Adjusted earnings before interest and taxes rose to $2.0 billion from $1.7 billion a year ago.
What’s Next
By 2022, Ford estimates it will earn between $11.5 billion and $12.5 billion in adjusted pre-tax profits, up 15% to 25% over 2021. It generates between $5.5 billion to $6.5 billion in adjusted free cash flow.
“We’re bullish on 2022,” Lawler said. “Even with persistent supply chain uncertainties that again illustrates the growing strength of our underlying business.”
The expected increase in earnings comes as constraints of the chip shortage are expected to ease throughout the year. Ford and other automakers were forced to sporadically shutter plants and depleted vehicle inventories due to the lack of chips.
The automaker said it expects to spend between $7 billion and $8 billion, up from $6.2 billion in 2021. As Ford executes CEO Jim Farley’s Ford+ turnaround plan and accelerates its transition to electric vehicles. That includes launches of electric versions of the Transit cargo van and F-150 pickup
