Ford Ends 2020 With Solid Quarter but 2021 Uncertainty
Ford F finished 2020 with fourth-quarter adjusted diluted EPS of $0.34, nearly triple the prior year quarter’s $0.12 and well above the Refinitiv consensus of a $0.07 loss.
Ford (F) finished 2020 with fourth-quarter adjusted diluted EPS of $0.34, nearly triple the prior year quarter’s $0.12 and well above the Refinitiv consensus of a $0.07 loss. Robust year-over-year improvements in pricing, particularly in North America and Europe, drove automotive adjusted EBIT up $1 billion to $1.26 billion and more than offset lost volume from the pandemic and the changeover to the new generation F-150 pickup. Adjusted free cash flow excluding Ford Credit nearly quadrupled to $1.9 billion thanks to higher distributions from Ford Credit and higher earnings. There was no word on resuming the dividend, but we would not be surprised if that news comes either at first-quarter earnings or in spring at a not yet scheduled investor day. Ford’s automotive liquidity is excellent at $46.9 billion, including cash and securities of $30.8 billion. Despite issuing $8 billion of bonds due to the pandemic, Ford finished 2020 with net automotive cash at $6.8 billion only $200 million less than at year end 2019.
We are not changing our fair value estimate, but we may increase it after rolling our model for the 10-K filing due this month. 2021 profit and capital expenditure guidance is better than what we were modeling. We also remain optimistic about the turnaround in costs possible under new CEO Jim Farley and new CFO John Lawler and strong demand for the Bronco, Bronco Sport, Mustang Mach-E, and the F-150, leading to improved market sentiment on Ford’s stock over the next few years. Furthermore, we believe Ford announcing it is increasing its combined electric and autonomous vehicle spending to $29 billion through 2025, which includes the combined approximately $9 billion cumulatively spent through 2020, will help Ford be competitive with GM’s EV plans and shows the market Ford is a serious EV player. A chip shortage is hurting Ford and management estimates as much as a $2.5 billion EBIT impact, but we like the direction Ford is heading.
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David Whiston does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.