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Ford is slashing production because of the global chip shortage.

Jeff Kowalsky/AFP via Getty Images

Ford Motor

had great first-quarter numbers, but the stock still fell. The reason: the global semiconductor shortage is forcing the auto maker to slash production again—and the size of the cut surprised investors.

Ford Motor

(ticker: F) expects to make 50% fewer vehicles in the second quarter, relative what it had planned—a big increase from the roughly 17% trim in the first quarter. Still, the company managed to grow sales and earnings year over year in the first quarter by assembling higher-value vehicles.

But even posting earnings of 89 cents a share, when Wall Street was projecting about 21 cents a share, wasn’t enough to boost shares. The stock was down about 3.7% in premarket trading Thursday. S&P 500 and Dow Jones Industrial Average futures were both up.

Despite the chip shortage, J.P. Morgan analyst Ryan Brinkman rates shares Buy and raised his 2022 earnings estimates—$1.70 a share from $1.50—and his price target, to $15 from $14 a share.

Brinkman, in his research report, pointed out Ford’s first quarter was driven by strong pricing and improved performance in the company’s overseas divisions, and added that the lower guidance was partly because of “a fire at a supplier plant in Japan which has exacerbated the supply crunch.”

Ford’s original guidance, given in February, excluded the semiconductor shortage and included a gain from the company’s stake in Rivian, a U.S. electric auto maker. Now the guidance includes the shortage and removes the gain, which translates to a $2.5 billion reduction in the range. All the numbers were already disclosed, but the new guidance crystallized the issue for investors.

RBC’s Joe Spak called guidance confusing in his research report. He rates Ford shares Hold and has a $13 price target. But the analyst also pointed out that Ford’s electric-vehicle battery strategy is changing. On Tuesday, Ford announced the creation of “Ion Park” to accelerate its battery research and development. Spak thinks the center will eventually produce batteries for Ford EVs. “This is an important and necessary development, but will also prove to be an incremental call on cash,” he wrote.

Like Brinkman, Benchmark analyst Mike Ward rates shares Buy. He, however, left his target price unchanged at $14 a share after earnings.

Ward wrote that the guidance “makes no sense,” adding “first quarter earnings were $2 billion higher than expected….what doesn’t seem to make sense, in our opinion, is the $4 billion reduction in company guidance for the remainder of the year.”

The math is odd. The guidance came down about $2.5 billion after a $2 billion first- quarter beat—a $4-plus billion change for the rest of 2021. It’s that confusion that was driving the stock lower Thursday.

Morgan Stanley analyst Adam Jonas is a Ford bear, rating shares Sell. His price target is $9 a share. Despite his bearish view, Jonas pointed out in his report that favorable supply/demand balance in the industry as well as Ford’s cost-cutting efforts are “bearing fruit,” adding “2021 is likely to go down as an oddball time for the industry.”

Jonas isn’t negative on Ford stock because of 2021 headwinds. He’s worried about the company being able to navigate the transition to EVs successfully, a long-term matter for investors to digest.

Overall, the Street believes it was a good, but confusing quarter for the auto maker.

Ford hosts an analyst-and- investor event on May 26. That will be another chance for analysts to grill Ford about the chip shortage as well as its EV strategy.

Write to Al Root at allen.root@dowjones.com

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