Ford Motor Co. (NYSE: F) seems to be caught between a rock and a hard place. While the COVID-19 instant recession has been brutal, Ford already was facing problems before the economy tanked in February and March.
Ford’s formal earnings are not yet out, but the company warned that revenue in the first quarter of 2020 was roughly $34 billion after wholesale was down about 21%. The company is also now looking at a pretax loss of about $600 million before interest and taxes, excluding special-item charges of about $300 million.
FactSet had a consensus sales estimate of $37.2 billion.
Only Ford’s joint ventures in China are producing wholesale vehicles at this time, but the company is considering a phased restart of its manufacturing operations and supply network in the second quarter.
While a loss and much lower revenues are awful, the reality is that many investors should have seen this coming after Ford announced it was suspending its dividend and halting share repurchases. Ford also was moved to junk-bond status in a recent credit rating cut.
Ford’s balance sheet as of April 9 was said to hold $30 billion in cash, after drawing down about $15.4 billion from credit lines in the prior month. That’s enough to last through at least the end of the third quarter of 2020, with no vehicle production, no wholesales and no financing actions. The company also is assessing all funding options to boost its balance sheet and increase liquidity.
Ford’s investor communications also noted that it has not yet calculated its tax rate for the first quarter and that it was not (yet) able to offer what its preliminary net loss per share would be. The company did show that it anticipates adjustments against deferred-tax assets of about $900 million.
The warning included a note that Ford Credit remains above its $25 billion liquidity target, with about $28 billion at the end of the first quarter, and that it still has access to diversified funding sources. Its debt maturities are also dated longer than its cumulative asset maturities.
One issue to consider is that China’s plunging sales also threaten the car industry.
With Ford stock down over 5% at $5.07 on Monday, that is a drop of 44.5% year to date, even after considering its last 15-cent dividend that was paid out on January 29. Ford’s 52-week trading range is $3.96 to $10.56.
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