Text size
Ford reported a $ 8.2 billion gain on its fourth-quarter investment in Rivia.
Courtesy FordFord Motor stock was hammered on Wednesday, but the reason for the fall is not obvious. Maybe Ford simply got investors doing too much math.
Ford shares fell 7.9%, far worse than the fall of 1% in both S&P 500 and Dow Jones Industrial Average.
It was the stock's worst day since April 29, 2021. Shares fell more than 9% that day as investors digested news of a semiconductor shortage and disappointing - and confusing - year-round financial guidance from the US automaker.
Confusion over guidance may also be at the core of Wednesday's big drop.
In a press release Tuesday night, Ford announced a number of special fees that investors should expect when the company reports fourth-quarter figures in early February. The headline from Tuesday's press release was a $ 8.2 billion gain in the fourth quarter at Ford's Rivian Automotive (RIVN) investment. Ford owns about 100 million shares in the electric truck manufacturer. Most of the other items in Tuesday's release qualify as accounting details.
However, Ford updated its full-year financial guidance, and that could be what investors reacted to.
"Ford wants to reclassify it [roughly] $ 900 million non-cash gain in the first quarter of 2021 at Rivian investment as a special item - a step Ford said in October it would take after Rivian's IPO, ”reads part of the announcement. "The reclassification means that the gain from the first quarter of 2021 will not be included in Ford's full - year adjusted EBIT [earnings before interest and tax] or adjusted EPS. "
It's a mouthful, but basically Ford's expectations for operating profit in 2021 are now $ 9.6 billion to $ 10.6 billion. That's $ 900 million less than the old $ 10.5 billion to $ 11.5 billion range. Although at first glance it appears to be a guidance cut, Ford actually just moved the $ 900 million around.
That is an explanation for the stock fall on Wednesday. Ford also noted special items for debt retirement, tax accounting and retirement accounting. Net of all the other charges is a gain of about $ 5.4 billion. Another big number, but nothing that has much to do with the company's long - term value, cash holdings or ongoing business operations.
In the end, there was perhaps just too much for investors to grab, which added a bit of uncertainty to the Ford stock. And one thing investors hate is uncertainty.
Write to Al Root at allen.root@dowjones.com