Ford Q2 FY 2021 Earnings Report Preview: What to Look For

Focus on F U.S. truck sales

Key Takeaways

  • Analysts estimate adjusted EPS of -$0.10 vs. -$0.35 for Q2 FY 2020.
  • Ford U.S. truck sales, as previously reported, declined YOY in Q2.
  • Companywide revenue is expected to grow at its fastest rate in at least 16 quarters as sales rebound from the shock of the pandemic.

Ford Motor Co. (F) may have begun to set the stage for a turnaround under the leadership of its new Chief Executive Officer (CEO) Jim Farley, who assumed the role in October. The company has redesigned several popular models, including an electric Mustang SUV and the flagship F-150 pickup truck. The company also plans to spend $30 billion to expand electric vehicle production. But Ford faces major challenges in making consistent profits, including a global semiconductor chip shortage that has shuttered or paused production at several facilities.

Investors will look at how Ford is navigating these challenges as the company reports earnings after the market close on July 28, 2021 for Q2 FY 2020. Analysts expect mixed results. Adjusted earnings per share (EPS) are expected to be negative for the first time since Q2 FY 2020, while revenue is expected to surge at its fastest rate in at least four years.

Investors also will focus on a key Ford metric, total U.S. truck sales. Trucks are highly profitable for the company. For has not published a specific number yet for total U.S. truck sales. But publicly available Ford data show that U.S. truck sales declined by nearly 1% in Q2.

After struggling to outpace the market from late July to early October 2020, Ford shares have raced ahead since then through July of 2021. The advance has been marked by a number of wide swings. After Ford released Q1 FY 2021 earnings in April, for example, the stock fell briefly before staging yet another rally into June. The stock has fallen back since then, but still far outpaces the broader market. Ford shares have provided a 1-year trailing total return of 97.8% as compared with 35.3% for the S&P 500, as of July 27.

One Year Total Return for S&P 500 and Ford
Source: TradingView.

Ford Earnings History

Ford posted negative adjusted EPS in two of the past 13 quarters: Q1 and Q2 FY 2020, at the start of the COVID-19 pandemic. Ford followed that by posting three straight quarters of earnings despite falling or tepid revenue growth. Adjusted earnings per share rose by 93% in Q3 FY 2020 and by 191.8% in Q4 FY 2020. Ford also posted a profit in Q1 FY 2021 compared to a loss a year earlier. Analysts predict that Q2 FY 2021 adjusted EPS will swing back to a loss, estimated at -$0.10 per share. Nonetheless, this loss would be much smaller than the same period a year earlier.

Ford's revenue performance history also has been erratic. The company posted six consecutive quarters of YOY revenue declines beginning in Q1 FY 2019. The most significant drop, of more than 50%, was in Q2 FY 2020. Since then, revenue performance has been stronger but still mixed. The company posted YOY increases in revenue for both Q3 FY 2020 and Q1 FY 2021, but Q4 FY 2020 saw a 9.5% YOY decline. Analysts expect a substantial acceleration in revenue growth in Q2 FY 2021, with revenue rising 27.6% YOY. This would be by far the largest YOY quarterly revenue growth in the past four years.

Ford Key Stats
  Q2 FY 2021 Q2 FY 2020 Q2 FY 2019
Adjusted Earnings Per Share -$0.10 (estimate) -$0.35 $0.28
Revenue (billions) $24.7 (estimate) $19.4 $38.9
Total U.S. Truck Sales 235,848 (actual) 237,891 324,243

Source: Visible Alpha; Ford Motor Co.

The Key Metric

As mentioned, investors also will closely watch total U.S. sales of Ford's trucks, the company's most popular vehicle type. Ford manufactures a range of light-, medium-, and heavy-duty trucks. Models include the F-150 series, Ranger, Super Duty, and more. In general, Ford's trucks tend to generate significantly higher profit margins than its smaller, lighter vehicles. The company has been making a strategic transition in recent years to shift production and sales toward more profitable pickup trucks and SUVs.

After posting sustained quarterly increases in 2019, Ford's truck sales since then have experienced numerous periods of weakness or declines since the onset of the global pandemic. The latest numbers show that Ford posted a 27% YOY decline in to total U.S. truck sales in June 2021. This significant drop largely reflects the production halts mentioned above due to the global chip shortage. Notably, Ford's U.S. truck sales across all of Q2 FY 2021 declined by a much smaller margin YOY as indicated above. Investors will watch the upcoming earnings report to see whether the steeper decline in June is a sign of a worse things to come or an anomaly.

Article Sources
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  1. New York Times. "Ford will spend $30 billion on electric vehicles, a big increase from earlier plans." Accessed July 27, 2021.

  2. New York Times. "Faltering for Years, Ford Is Showing Signs of a Revival." Accessed July 27, 2021.

  3. CNBC. "Chip shortage causes Ford to slash vehicle production at several plants in July." Accessed July 27, 2021.

  4. Ford Motor Co. "Ford Motor Company Second Quarter 2021 Earnings." Accessed July 27, 2021.

  5. Visible Alpha. "Financial Data." Accessed July 27, 2021.

  6. Ford Motor Co. "First Quarter 2021 Sales," Page 1. Accessed July 27, 2021.

  7. Ford Motor Co. "June 2021 Sales," Page 2. Accessed July 27, 2021.

  8. Ford Motor Co. "Showroom: Truck & Van." Accessed July 27, 2021.

  9. Ford Motor Co. "Annual report for the fiscal year ended December 31, 2020," Page 34. Accessed July 27, 2021.

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