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Ford (F) stock price fell about 5% at the news of its losses in Q1. Poor earnings results are mostly related to the COVID-19 situation.
Ford Motor Company (NYSE: F) stock price is down in the-pre-market. Though yesterday, F stock jumped 4% to $5.38, in the extended hours stock fell 5% on the release of its quarterly earnings report. The stocks continued to fall post-market yesterday and pre-market today. At the press time, it is 3% down. Its current price level is $5.22. There is an annual 42% Ford (F) stock drop this year alone.
Ford (F) Stock Price Falls as Company Declares Losses
Adjusted one-time losses before tax though were $632 million. This massive loss is mostly due to the COVID-19 situation. Ford expects that losses will cross $5 billion in the next quarter. Ford lost $2 billion due to the coronavirus pandemic as well.
These dire predictions come as Ford was in the middle of an $11 billion restructuring plan when the Coronavirus hit. Chief Financial Officer (CFO) Tim Stone has said that this restructuring plan will continue.
The quarterly earnings report revealed quite a bit. The quarterly revenue of $34.32 billion was better than the expected $32.54 billion. It is a 14.9% decline as well.
Many in the automaker industry have indicated that this is Ford’s worst performance since the great depression. They think that one of the world’s most iconic automakers has an uphill battle this year. They may be right. Ford has spent about $ 2 billion this year with no profit in sight. With earnings per share loss of about 23 cents, things are about to get worse.
The COVID-19 situation has no reported end in sight. Ford’s factories in the USA are shut down. They may not reopen for a bit. With the shelter-in-place restrictions still in effect, there won’t be much demand if any this year.
The rise of electric vehicles also threatens Ford’s survival. Companies such as Tesla Inc (NASDAQ: TSLA) are upending the electric vehicle market with homegrown technology. More people will turn to electric vehicles. Once they realize that the long-term costs of owning combustible fuel earnings are higher they will become EV fans.
Automaker Has to Adapt
This leaves Ford in an enviable position: adapt or die. With a $35 billion cash reserve, this may be the way out. Already, Tim Stone has indicated that the reserves may keep the automaker running. This comes after an earlier sales of $8 billion in bonds is expected to keep the company afloat. Manufacturing though may remain shuttered in the U.S. till next year. As Stone has already said:
“Our objective is not to just withstand the crisis. We’re ensuring the flexibility to continue to invest in our future.”
This may be the best time for such investments. Like most companies, Ford has suspended its dividend issuance. It has also halted its annual guidance. This is due to the topsy-turvy nature of the COVID-19 situation.
Ford also plans to reopen its European plants as early as next week. This comes as there is no end in sight for the coronavirus in the United States.
This proves that the automaker is doing everything to outlast this crisis. At this time, it may be the management’s response to this crisis that will keep Ford going through the storm. After all, to quote its founder Henry Ford:
“You say I started out with practically nothing, but that isn’t correct. We all start with all there is, it’s how we use it that makes things possible”.
That may apply to the Ford Motor Company at this time.