Our full-year Ford (F) 2021 adjusted diluted EPS of $1.72 was below the Refinitiv consensus of $1.93, so we felt fourth-quarter market expectations for Ford were too high and this proved correct with Ford reporting $1.59 for the full year. Fourth-quarter adjusted diluted EPS of $0.26 missed the Refinitiv consensus of $0.45 and sent the stock down over 5% in after hours Feb. 3 trading. Ford cited the omicron variant’s impact on its supply chain not allowing all demand to be met, particularly for Super Duty pickups and we note a large unfavorable adjusted tax variance year over year that perhaps was not adequately factored into consensus. The company also fought a $1.4 billion commodity cost headwind compared with fourth-quarter 2020 but a $2.5 billion tailwind on pricing, as inventory remains low and Americans want expensive light truck models, helped automotive adjusted EBIT grow by $381 million year over year. We are not changing our fair value estimate but will reassess all modeling assumptions once the 10-K is filed.
The chip shortage and COVID-19 supply chain issues should improve in 2022 versus the past two years so we are not worried about Ford’s long-term prospects. 2022 guidance was what we were more interested in given the chip shortage, inflation, and higher commodity costs. Guidance is in line with our model with total company adjusted EBIT between $11.5 billion and $12.5 billion, up 15%-25% from 2021, while we have been modeling $11.4 billion and free cash flow guidance (excluding Ford Credit but including its distributions) is for $5.5 billion to $6.5 billion versus our $6.4 billion. Management pointed out that the high end of adjusted EBIT guidance would mean a margin of 8% one year earlier than the 2023 goal. We are also encouraged that management raised its preliminary wholesale unit growth estimate of 10% given in October to 10%-15%, though for first quarter, Ford expects a high-single or low-double-digit decline due to the chip shortage and COVID-19.
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