Ford Motor Company is set to report Q4 2019 earnings Tuesday. The automaker reported an underwhelming third-quarter [Auto News], and analysts expect another contraction in revenue as well as subdued earnings.
A depressed earnings report may be priced in already. Since estimates have already been revised lower due to the automaker’s recent struggles, the stock may even rally on a minor beat. In the end it might not matter as Ford struggles with global headwinds.
Ford’s sales in China have been in free-fall [Reuters] since 2017. After a slight drop in 2017, sales plunged 37% in 2018 and 26% in Q3 2019 . Clearly, China has been the primary contributor to the overall revenue contraction.
In December, the company claimed that losses in China had fallen 50% in 2019 compared with the previous year [The Motley Fool]. The automaker further claimed that it expected another 50% drop in China in 2020.
Ford said that the figure doesn’t represent formal guidance, and the coronavirus outbreak has ensured it will miss out on that target.
All major makers have already been struggling [The Wall Street Journal] to deal with the coronavirus’ effects in China, and Ford is no exception. Most carmakers have had to ask employees to stay home and restrict travel.
The damage from coronavirus will not manifest itself in Q4, but it’s highly likely that Ford will have to cut its top and bottom-line guidance in China on Tuesday’s conference call.
The outbreak is still spreading like wildfire and has the Chinese government panicking. With tens of millions of people quarantined and no vaccination expected shortly, the automobile market will take a massive hit in China, which is terrible news for Ford.
Europe is Ford’s third-largest market, and it has been feeling the effects of a broader auto industry slowdown. The company sold just 1.3 million cars in its 20 traditional European markets, recording a unit sales decline of 1.4% compared to 2018 [Biz Journals].
Worse, the company’s European business hasn’t been making money as buyers haven’t warmed up to the American manufacturer. Consequently, Ford has been forced to rely on job cuts [New York Times] to return to profitability, which is never a good sign.
Ford’s F-150 pickup trucks are its bread and butter. But the company has failed to successfully diversify its fleet and make headway in other significant markets.
Prospects in China look catastrophic due to the coronavirus outbreak. The long-term headwinds have rendered the Q4 earnings report useless as Ford is doomed irrespective of what happens tomorrow.
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