The share of Ford Motor Co. plunged by almost 10% on Thursday - the biggest one-day drop since June - as analysts assailed the company for providing confusing guidance on how the global shortage of computer chips will affect its earnings.
The company posted first quarter adjusted earnings per share Wednesday that were four times better than Wall Street expected, but also warned semiconductor scarcity will cut second quarter production in half.Ford lowered its 2021 forecast for adjusted earnings before interest and taxes to a range of $5.5 billion to $6.5 billion, not much more than the $4.8 billion it made in the first quarter.
That caused consternation in the investment community, which traded Ford shares in the stock market by more than 40% this year before Wednesday, is impressed by new models such as the Bronco Sport and new Chief Executive Jim Farley's more aggressive electric vehicle strategy.
Joseph Spak called RBC Capital Markets analyst's Financial Forecast in a research note '' confusing.And Benchmark analyst Michael Ward wrote that Ford's direction '' makes no sense.
'Either the chip impact is much lower than the projected $2.5 billion estimate by the company or structural earnings, especially in North America, are significantly lower than earlier assumptions, wrote Ward in a note to investors issued before the open of the market Thursday. The mathematics simply doesn't add up and Ford’s credibility is going to take a hit in our opinion.
Ford shares closed down from 9.4% to $11.26 - the largest drop since 3 February and deepest decline since 11 June.
Adding to the financial woes of the company, S&P Global Ratings said Thursday that it will likely keep a negative outlook on Ford through the end of the year because the automaker's earnings and cash flow have been weaker than expected.It puts Ford at greater risk of a ratings downgrade that would make it deeper into junk.
'The negative outlook on Ford reflects the at least one-in-three chance we will downgrade it in the next 12 months.' The report cites, among other factors, the potential for significantly weaker cash flow in upcoming quarters stemming from its ongoing production shutdowns related to the semiconductor chip shortage.
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