Flea-Bitten Ford Gives Investors a $ 600 Million Reason to Dump the Stock, Crypto Coins News
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Ford released preliminary first-quarter results that predict a massive collapse in revenue and EBIT.
The company is undergoing an ill-advised restructuring program that was designed to boost its margins. But it isn’t working.
Ford faces many challenges, including a recent debt downgrade. And it will continue to underperform the stock market.
Investors who hoped for a V-shaped recovery in Ford stock will be sorely disappointed as the company continues to burn shareholder value. The automaker expects to lose $ million in the first quarter alone despite generating $ (billion in revenue.)
Ford’s inability to generate profits is cause for concern. The company’s multi-billion dollar restructuring program was designed to boost profitability. But it has completely failed.
Ford stock was already a dog. Now, it’s a dog with fleas . And investors can expect the struggling automaker to continue underperforming the market as relentless cash burn sends its credit rating further into junk status.
) Ford’s Restructuring Plan Is a Complete Failure
In July Ford embarked on (an $) billion restructuring program
designed to trim fat in the business and eliminate redundancies. The plan included the discontinuation of most of Ford’s U.S. sedan lineup to focus on higher-margin trucks and SUVs.
While the strategy caused brutal layoffs and the discontinuation of beloved brands like the Taurus, it hasn’t resulted in the higher margins that management promised.
Ford’s fourth-quarter results were dismal. Total revenue fell 5% from $ . 8 billion to $ . 7 billion. U.S. EBIT margins fell a staggering % from 8.8% to 2.8%. Margins in Europe and China were 0.3% and – 5% , respectively. And, unsurprisingly, the company lost $ 1.7 billion in that quarter alone.
Remember, this was before the coronavirus pandemic. So Ford’s situation will go from bad to worse in 56684.
The company total long-term automotive debt stands at around $ . 6 billion, while credit debt stands at a whopping $ 366 billion.
Ford may have a hard time meeting its obligations as cash burn from the automotive segment intensifies while defaults start to pile up in its credit s egment amid coronavirus lockdowns and a worsening global recession.
Ford Debt is Officially Classified as Junk
Ford’s long-term debt is soaring amid deteriorating cash flow. This chart includes debt from the credit segment. | Data by Ycharts. As if massive losses weren’t bad enough, Ford’s once-respected name has been downgraded to junk status.
With low credit ratings come higher borrowing costs. This will intensify pressure on Ford’s already strained cash flow. The company paid $ 635 million in interest expense in , down from a whopping $ 823 million in .
This added liquidity should help stave off bankruptcy. But the automaker’s balance sheet is getting weaker. And Ford stock is likely to continue underperforming the market over the long term.
Ford’s stock is down around 5% today
after the poor first-quarter guidance. Shares have fallen over (% year-to-date compared to a) (% decline in the S&P) .
Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com.
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