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Why Shares of Ford Are Rising Today

By John Rosevear - Apr 17, 2020 at 1:39PM

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Ford warned of a big loss, but investors seem relieved.

What happened

Shares of Ford Motor Company (F -2.52%) were moving higher on Friday, after the company warned that it lost about $2 billion in the first quarter and said it may tap the bond market to raise additional cash.

As of 1:15 p.m. EDT, Ford's shares were up about 4.5% from Thursday's closing price.

So what

Ford had said on Monday that it expected to report an operating loss for the first quarter, but that it hadn't yet calculated its tax obligation for the period. Ford amended that statement in a filing with the Securities and Exchange Commission (SEC) on Friday, saying that it now expects to report a net loss of about $2 billion on revenue of $34 billion. 

A red Ford pickup truck is shown parked outside of Ford's Kentucky Truck Plant in Louisville, Kentucky.

Ford is hoping to reopen several of its U.S. plants in May. Image source: Ford Motor Company.

Both of those figures fell short of Wall Street estimates, but given the effects of the coronavirus on Ford's sales and manufacturing in the quarter, auto investors had some reason for relief: It could have been much worse.

In a separate SEC filing, Ford laid the regulatory groundwork to raise additional cash by issuing new unsecured notes. Ford didn't say how much it plans to raise, or how much interest it will pay on the notes; a Ford spokesperson said those details will be provided in a later filing. 

Now what

Auto investors don't appear to be concerned by the news that Ford might tap the bond markets for cash -- and that's probably the right reaction. With most of its plants idled until the pandemic subsides, Ford is burning a lot of cash, but it still has plenty: About $30 billion as of April 8, it said on Monday, enough to last at least through September if its factories can't reopen before then.

Given the Federal Reserve Bank's stated willingness to backstop bond issues from companies that recently lost their investment-grade status, as Ford did, it's probably a prudent idea for Ford to take advantage and raise extra cash, if it can do so at rates that aren't too painful. 

Long story short: For Ford investors, today's news wasn't great news, but it wasn't surprising -- and it could have been a lot worse. 

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