DETROIT – Ford Motor simply beat Wall Road’s expectations for the first quarter regardless of an ongoing world semiconductor chip scarcity inflicting low inventories and manufacturing unit closures. So why are shares of the automaker down by as a lot as 10.4% throughout intraday buying and selling Thursday?

The detrimental response by buyers is a mixture of points related to the chip problem following Ford reporting its outcomes after the closing bell Wednesday.

Whereas analysts have been totally impressed with the corporate’s efficiency within the first quarter, which included a document $4.8 billion in adjusted pretax earnings, they have been far much less impressed, if not confused, with its steering for the 12 months.

“Let’s simply put it like this: Ford’s 1Q was far ‘too good’ to extrapolate whereas the rest of the 12 months is ‘too challenged’ to extrapolate,” Morgan Stanley analyst Adam Jonas stated in a observe to buyers.

Listed here are 5 key takeaways from Ford’s first quarter outcomes and its 2021 steering that buyers ought to learn about.

No less than three analysts described Ford’s outlook for the 12 months, which it reaffirmed Wednesday, as complicated or puzzling.

“Whereas Ford’s 1Q:21 outcomes have been spectacular, the corporate considerably confusingly … communicated its 2021 monetary outlook, which we consider is creating some investor concern,” BofA International Analysis analyst John Murphy stated in a observe.

RBC Capital’s Joseph Spak reiterated these feedback, including the steering was “complicated” and it is a “bit unclear” whether or not the depth of issues of the chip scarcity is unique to Ford. Barclays analyst Brian Johnson described Ford’s operational turnaround being “dented” by its “puzzling” steering.

Ford stated the chip scarcity would slash full-year earnings by about $2.5 billion – the high-end of a earlier steering – earlier than curiosity and taxes to $5.5 billion-$6.5 billion. In February, Ford initially set a guidance of $8 billion-$9 billion with out factoring in an anticipated $1 billion-$2.5 billion impression from the scarcity.

However the reaffirmed steering after a better-than-expected first quarter implies weaker outcomes via the rest of the 12 months outdoors of the chip scarcity, in accordance with analysts.

Ford CFO John Lawler additionally described the $8 billion-$9 billion steering earlier than curiosity and taxes as a “launching pad” for 2022.

Exterior of impacts from the chip scarcity, outcomes for the corporate have been stable, assisted by automobile pricing will increase associated to the chip scarcity.

The Detroit automaker reported web earnings of $3.3 billion, which was its finest since 2011, and a document adjusted pretax revenue of $4.8 billion.

Its adjusted earnings per share was 89 cents in comparison with Wall Road expectations of 21 cents based mostly on common estimates compiled by Refinitiv. Its automotive income was $33.55 billion versus $32.23 billion anticipated.

Lawler stated Ford was capable of offset earnings losses from its lowered manufacturing within the first quarter via lowered incentives on automobiles offered, prioritizing manufacturing of extra worthwhile automobiles and decrease manufacturing prices, amongst different price reductions. The automaker additionally benefited from increased earnings from its financing arm Ford Credit score.

Feedback from analysts concerning the primary quarter included “too good,” “very spectacular” and a “blowout.”

Notably, Ford’s earnings outdoors of North America, by far its strongest market, have been $454 million, $980 million higher than similar quarter a 12 months in the past. Its North American operations recorded a 12.8% revenue margin and earnings of practically $3 billion to begin the 12 months.

“Aided by increased costs, our outcomes benefited from the industry-wide imbalance of provide and demand given the semiconductor scarcity,” Farley stated. “Nevertheless, we additionally delivered enhancements that can persist over time, together with our world redesign in our abroad operations which contributed to the most important swing in year-over-year profitability for these operations that we have seen.”

The corporate’s guarantee prices, which have been extraordinarily troublesome is latest years, additionally improved by greater than $400 million from a 12 months in the past

The corporate believes that the semiconductor subject will backside out through the second quarter, with enchancment via the rest of the 12 months, however the impacts might proceed into 2022.

“There are extra whitewater moments forward for us that we have now to navigate,” Farley advised buyers. “The semiconductor scarcity and the impression to manufacturing will worsen earlier than it will get higher.”

The corporate stated it now expects to lose 1.1 million items of manufacturing this 12 months as a result of chip scarcity. It additionally has partially produced about 22,000 automobiles, together with its Ford F-150 pickups, with out some chips to be accomplished and shipped at a later date.

One thing Wall Road will possible proceed to look at is whether or not or not Farley can preserve his promise to maintain automobile inventories low in North America, which help earnings. A roughly 60 days’ provide is usually thought-about wholesome for the {industry}, whereas extremely configurable automobiles similar to pickups are sometimes increased than that.

Farley advised buyers Wednesday that the corporate will run leaner automobile inventories sooner or later: “I wish to make it extraordinarily clear to everybody. We’re going to run our enterprise with a decrease days’ provide than we have now had within the latest previous, as a result of that is good for our firm and good for purchasers.”

Whereas which will sound so simple as producing much less automobiles, it isn’t. Automakers should stability provide and demand with sellers, a lot of whom are begging for in style truck and SUV fashions, in addition to its staff.

Current contracts between the Detroit automakers and United Auto Staff present extra flexibility concerning manufacturing however having tens of hundreds of plant staff laid off will be pricey. There’s additionally a matter of retaining staff and sustaining vegetation, which might take weeks to restart after being shut down.

Giant vans and SUVs have among the many lowest provides within the U.S., in accordance with Cox Automotive. To finish the primary quarter, full-size pickup vans had a below-industry-average stock of 48 days’ provide, down considerably from 61 days in February. The Ford F-150 was all the way down to 56 days’ provide, in accordance with Cox.

Morgan Stanley’s Jonas believes the potential for a re-rating for Ford will hinge on its plans to maneuver from automobiles with inside combustion engines, or ICE, to battery electrical automobiles, or BEVs.

“We consider that the potential for re-rating for Ford (and its OEM friends) will come all the way down to execution of the technique to pivot to BEV improvement whereas managing the run-out of the ICE legal responsibility,” he stated in a observe.

Whether or not or not Ford can ship on growing investor confidence in its EV plans is predicted to come back throughout an investor day on Could 26.

Farley promised buyers that the corporate will lay out how the automaker plans to “lead the electrical automobile revolution in areas that we’re robust at Ford.”

Deutsche Financial institution on Thursday reiterated a short-term catalyst name purchase score on Ford heading into the capital markets day. It additionally raised 2022 earnings per share for Ford near $2.

Ford earlier this 12 months introduced plans to extend its funding in EVs by $10.5 billion to $22 billion via 2025. That excludes potential spending on any battery vegetation.

The corporate introduced plans Tuesday to “eventually” manufacture its personal batteries and battery cells. Nevertheless, the corporate declined to debate a timeline to take action.

– CNBC’s Michael Bloom contributed to this report.