Wall Street expects $41.2 billion in sales for Ford’s fourth quarter.
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When Ford Motor reports fourth-quarter results Thursday evening. it’s going to take more than a simple earnings “beat” to get the stock moving higher in the short run. Ford needs to blow investors away.
Wall Street expects fourth-quarter earnings of 45 cents a share along with $2.8 billion in operating income from $41.2 billion in sales. A year ago, in the fourth quarter of 2020, Ford reported 34 cents in per-share earnings and $1.7 billion in operating profit from $36 billion in sales.
Looking ahead, for 2022, analysts project $2.05 in per-share earnings and $12 billion in operating income from $156 billion in sales.
Earnings and financial guidance are always key, but surpassing Wall Street expectations and offering strong guidance might not be enough this time for the stock to jump higher. Consider what happened to General Motors (GM) stock this week.
GM reported better-than-expected fourth-quarter earnings on Tuesday evening and said production should grow 25% or 30% in 2022.
“The outlook, the growth numbers, were very strong,” Edward Jones analyst Jeff Windau tells Barron’s.
Still, GM stock dropped 0.8% Wednesday, the day after the earnings report, while the S&P 500 and Dow Jones Industrial Average rose 0.9% and 0.6%, respectively.
Good guidance wasn’t enough because investors might be wondering if this is as good as it gets for the sector. “Now we start to think about peak auto, right? Volumes would [not] be at the peak, but are we starting to get to peak profitability with all the investments [happening],” adds Windau.
Investment spending is rising at both GM and Ford as the pair pivots toward electric vehicles. Higher spending can drain cash flow, which investors sometimes don’t like. Windau also points out that profitability is being pressured by rising costs. Raw materials, labor, and parts are all getting more expensive.
Windau rates both stocks Hold, without a price target for either. A hold rating for him, essentially, means the stock will keep up with the market.
All this means that Ford needs to surprise investors beyond just beating earnings estimates in order to drive its stock higher.
Ford will talk more about the demand and production of its electric-vehicle lineup. EV news could be the source of a needed surprise.
Ford sold another 2,370 electric Mustang Mach E vehicles in January, up slightly from the 2,349 sold in December. Ford’s planned 2022 production of electric Mustangs could pleasantly surprise investors if the company believes it will deliver substantially more than the 27,000-plus sold in 2021.
Later in the first quarter, Ford should start delivering the all-electric F-150 Lightning. The F-150 has been America’s best-selling vehicle for 40-plus years, making the success of the F-150 Lightning one of the most important launches in the company’s history. Like the Mach E, planned production levels could be the source of surprise.
Ford might also talk more about EV investment the company is planning. Bloomberg reported Tuesday that Ford would add another $20 billion in EV spending on top of $30 billion in planned spending, which was slated through 2025. Ford declined to comment on that report, but analysts and investors will expect to hear something about higher EV spending on Thursday.
Ford management will host a conference call at 5 p.m. ET, shortly after earnings are reported.
Coming into Thursday trading, Ford stock is down about 1% year to date and up about 90% over the past year. The S&P 500 is down 4% and up 20%, respectively, over those two periods.
Write to Al Root at [email protected]
