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Ford swings to Q1 profit, but expects $2.5 billion hit from chip shortage

Ford Motor Co. said late Wednesday it had one of its best quarters on record as it swung to a profit and consumers welcomed a slew of new vehicles, but the stock fell more than 3% in the extended session as the auto maker said the global chip shortage could lead to a $2.5 billion hit to its bottom line this year.

Ford
F,
-0.48%

said it earned $3.3 billion, or 81 cents a share, in the first quarter, contrasting with a loss of $2 billion, or 50 cents a share, in the year-ago quarter.

Adjusted for one-time items, Ford said it earned 89 cents, versus an adjusted loss of 23 cents a share a year ago.

Total sales rose 6% to $36.2 billion, the company said. That includes a 5% rise in North America sales to $23 billion, benefiting from “strong customer demand” for Ford’s Mustang Mach-E, the all-new F-150 pickup truck, and the Bronco Sport, Ford said. Sales also benefited from tight vehicle inventories due to the ongoing chip shortage.

Analysts polled by FactSet expected Ford to report adjusted earnings of 22 cents on sales of $36.13 billion.

See also: Tesla’s first-quarter sales rise more than 70%, but stock slips

It was a “massive beat,” but the company lowered guidance and the estimated impact from the chips shortage came in at the top of a previous range, CFRA analyst Garrett Nelson said in a note late Wednesday.

Ford “is relentlessly executing our plan to turn around our automotive business,” and Ford is becoming a “stronger, more resilient company,” Chief Executive Jim Farley said in a statement.

The company said it has managed the global chip shortage “skillfully,” but expects that the problem “will get worse before it gets better.”

The worst of the shortage is likely to take place during the current April-June quarter, and should improve through the rest of the year, though it may not be fully resolved until 2022, Ford said.

About half of its planned second-quarter production will be lost, Ford said.

Its effects will continue to be felt during the rest of the year. “The company now assumes that it will lose 10% of planned second-half 2021 production,” and all told will lose about 1.1 million units of production this year to the semiconductor shortage, Ford said.

Ford guided for full-year 2021 adjusted EBIT to be between $5.5 billion and $6.5 billion, from a previous guidance of between $8 billion and $9 billion, including the $2.5 billion hit from the chip shortage, from a previously estimated impact between $1 billion and $2.5 billion earlier this year.

It projected adjusted free cash flow for the full year between $500 million and $1.5 billion.

Ford shares have gained around 132% in the past 12 months, compared with gains of around 46% for the S&P 500 index
SPX,
-0.08%

in the same period.

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