$F (Ford Motor Company) reported their Q4 2021 earnings yesterday and guided for the year ahead, so let’s dive into it!
First off, $F was expecting a Q4 revenue of $35.62 billion and an EPS of $0.41. They missed on both figures, reporting a Q4 revenue of $35.26 billion and an EPS of $0.26. The EPS miss seemed to worry investors, as at the time of writing this $F is down almost 5% in after-hours trading
In their earnings call, Ford CEO Jim Farley described 2021 as a “year of important progress for the company” and “expect to deliver even stronger results this year”. Ford discusses their turn towards electric vehicles, and believes that although they are an 118 year old company, they can emerge as a winner in the industry moving forward. Mr. Farley also admits they are doing everything they can to increase production and break constraints, as demand has been difficult to keep up with. He also mentioned Ford is making progress outside of North America, and they feel that this is very important to their business.
As with many earnings calls recently, questions about supply chain issues arose. Mr. Farley said that one lesson they have learned is that “[Ford] cannot manage the supply chain for these key components we have”. This is referencing the trouble they are having with semiconductors, and shows their need to design the SoC themselves, Mr. Farley says.
When asked about a weaker than expected Q4, John Lawler, Ford CFO, said they “had supply chain constraints hitting us this quarter”. On top of this, he added “Omicron disrupted several of our key suppliers. They couldn’t produce. They couldn’t get us products”. This shows that pressures from the supply chain and omicron persist even for one of the largest automotive companies in the world, and it is reflected in weaker-than-expected earnings.
“And then we saw costs come through from inflation. We saw costs come through on transportation, on fuel, et cetera. So we’re seeing some of those headwinds were hitting us in the fourth quarter. But demand was strong”. Mr. Lawler opened up about the inflationary struggles Ford dealt with in Q4, and how it was a strong headwind for them financially. Despite this, demand remained strong, which, if supply chain constraints can ease, will be beneficial for Ford.
Supply strain constraints and inflationary pressures continue to put added pressure on many firms, and Ford is another added to the list. Demand remains strong but they cannot keep up with it. While this is a common theme across many sectors in the market, you hope to see reports that this is changing, but it seems we will keep waiting for good news.
For full transparency, I do not own any shares of $F at the time of writing this. Thank you for reading!
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