Ford stock price drops 5% on warnings of first-quarter losses

Written by: Michael Harris
April 16, 2020
  • Ford expects to report the adjusted pretax loss of about $600 million for Q1
  • The carmaker warns its Q1 revenue may decrease by nearly 16% due to the COVID-19 outbreak
  • Shares of the company trade around 5% lower on the issued profit warning

Shares of Ford Motor (NYSE:F) plunged 5% on Monday after the carmaker issued a warning that it expects an adjusted pretax loss of around $600 million for the first quarter. 

Fundamental analysis: Revenue expected to decrease by 16%

Ford said it is still too early to report accurate Q1 numbers, but said that it expects the adjusted pretax loss of about $600 million due to the coronavirus outbreak. The carmaker posted its first-quarter net income of $1.15 billion a year ago. 

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“We continue to opportunistically assess all funding options to further strengthen our balance sheet and increase liquidity to optimize our financial flexibility. We also are identifying additional operating actions to enhance our cash position,” Tim Stone, Ford’s CFO, said in a press release

Ford said it has about $30 billion in cash on its balance sheet, out of which $15.4 billion is from two credit lines used last month. 

“We believe we have sufficient cash today to get us through at least the end of the third quarter with no incremental vehicle production and wholesales or financing actions,” said Stone.

The Michigan-based car giant said it expects that the first quarter revenue will be around $34 billion, which is 15.7% down from the same period a year ago, due to the drop in the first-quarter vehicle wholesales by 21% from a year ago.

Ford is preparing for a “phased restart” in the second quarter.

“Presently, only Ford’s joint ventures in China, where coronavirus risks developed earlier and are now moderating, are producing and wholesaling vehicles. The company is considering a scenario for a phased restart of its manufacturing plants, supply network and other dependent functions beginning in the second quarter, with enhanced safety standards in place to protect workers,” said Ford in a statement. 

Technical analysis: Stock price struggling to recover

Shares of Ford are trading around 5% lower today after the company issued a profit warning for the first quarter. Despite the recent rebound in global equities, the Ford stock price is struggling to stage a more decent recovery after dropping around 55% since early February. 

Ford stock weekly chart (TradingView)

The sellers are in control of the price action as they are looking to push the price lower towards the key support around the $3 mark. On the upside, the bulls need to attempt to get to $6.5 first, before attempting a more meaningful recovery. 

Summary

Shares of Ford have moved around 5% lower today after the car marker issued a profit warning for the first quarter, in addition to a 15.7% drop in revenue compared to a year ago.