Ford’s results smashed expectations. Why the stock is falling.

Ford's results broke expectations.  Because the shares are falling.

Business News: Ford’s results smashed expectations. Why the stock is falling..

Ford Motor’s earnings surprised to the upside again, reporting better-than-expected first-quarter profits. The result looks great, but the shares are down. The reason: The global semiconductor shortage is starting to hurt, causing Ford to lower its full-year earnings forecast.

Ford (ticker: F) managed to crush earnings expectations in the fourth quarter as well. Carrying out that feat this time around was a little more difficult, though. The shortage of shavings, coupled with higher raw material costs, have made life difficult for all car manufacturers. The shortage has manifested itself in the numbers and the impact for the current quarter will be much greater.

For the first quarter, Ford Motor (ticker: F) reported an adjusted earnings of 89 cents per share from $ 36.2 billion in sales. Wall Street was looking for 22 cents of earnings per share from about $ 36 billion in sales. That’s a huge “beaten” gain, but stocks are down about 3.3% in overtime trading. Going into the earnings release, Ford shares were up about 42%, much better than comparable earnings from the S&P 500 and the Dow Jones Industrial Average.

The semiconductor shortage has affected Ford’s free cash flow. This is a cause for concern. Ford burned about $ 400 million in the quarter in part because it came out with more unfinished cars. That impact is expected to resolve in the coming months when Ford ships the vehicles to dealerships. Retail auto sales are booming in the United States and dealership inventories are low, contributing to rising new car prices and record used car prices.

CFO John Lawler told reporters that the company currently expects semiconductor availability “to get worse before it gets better.” Lawler said Ford expects the chip shortage to reach its worst between now and the end of June, with supplies improving through the second half of 2021.

Most of the world’s major car manufacturers have had to reduce production of some models due to a shortage of computer chips, following the increased demand for high-end computers and devices from consumers stayed home during last year’s global pandemic.