Technology

Ford Stock Drops as Automaker Adjusts 2024 Profit Forecast Despite Q3 Sales Beat

Ford's Q3 earnings exceed expectations, yet the automaker revises its 2024 profit forecast lower, causing stock to dip.

Ford Motor Company (F) reported its third-quarter earnings after the market close on Monday, showcasing a revenue beat yet guiding towards the lower end of its full-year forecast. This update contrasts sharply with the performance of rival automaker GM, which recently announced a robust Q3 report along with a profit guidance boost for the year.

Automaker Ford Reports Q3 Revenue Beats Expectations

Ford’s revenue for the third quarter reached $46.2 billion, surpassing the Bloomberg estimate of $41.9 billion. Although this figure is lower than the $47.8 billion reported last quarter, it represents a 5% increase from the $43.8 billion reported during the same period last year.

The automaker also posted an adjusted EPS of $0.49, matching analysts' expectations, with an adjusted EBIT (earnings before interest and taxes) of $2.6 billion. Net income totaled $900 million, impacted by a $1 billion one-time charge related to electric vehicles (EVs), which had been previously disclosed.

Automaker Lowers Full-Year Profit Forecast

Following these results, Ford has adjusted its full-year profit forecast, now projecting 2024 adjusted EBIT to be around $10 billion. This estimate marks the lower end of its previous guidance, which ranged from $10 billion to $12 billion. Consequently, shares fell over 5% in premarket trading on Tuesday.

In a media call, Ford Vice Chair and CFO John Lawler attributed lower sales in the automaker's Ford Pro and Ford Blue divisions to "supplier disruptions." He noted that some of these disruptions stemmed from recent hurricanes impacting the southern U.S.

Cost Challenges and Financial Upside for the Automaker

"Costs, particularly in warranty claims, have limited our earnings potential," said Ford CEO Jim Farley during the analyst conference call. "However, as we address these issues, significant financial upside lies ahead for our investors."

As part of its Ford+ plan, the automaker has segmented its business into three units: Ford Blue for traditional gas-powered vehicles, Ford Model e for its electric vehicle division, and Ford Pro for commercial and super-duty truck operations. Analysts anticipated the following performance metrics for Q3:

• Ford Blue: $26.2 billion in revenue, $1.627 billion in EBIT

• Model e: $1.2 billion in revenue, -$1.224 billion in EBIT

• Ford Pro: $15.7 billion in revenue, $1.814 billion in EBIT

Ford expects Model e losses to reach approximately $5 billion for the full year, slightly lower than the previously projected $5.5 billion.

Automaker Aims for Improvement in Battery Production

Farley is optimistic about improvements in battery production as a key driver of profitability. "We anticipate significant progress in the production tax credit for our first-generation products over the next few years. We've restructured our battery sourcing to maximize the PTC, which will significantly reduce costs for our existing products," Farley explained during the call.

US Deliveries Reflect Solid Demand for the Automaker

Ford’s Q3 U.S. deliveries, reported earlier this month, increased by 4.3% year-over-year, totaling 504,039 vehicles. However, this figure is still down from the 536,050 vehicles delivered in the previous quarter. Notably, EV sales surged by 12% year-over-year, driven primarily by the Ford Lightning pickup and Ford E-transit van. Furthermore, hybrid vehicles, particularly the Maverick pickup, saw a remarkable 38% increase in sales compared to the previous year.

Automaker’s Future Outlook Amidst Rival GM’s Success

In stark contrast, GM has consistently raised its guidance throughout the year, now projecting an adjusted EBIT of $14 billion to $15 billion, up from a previous estimate of $13 billion to $15 billion. GM also announced $16 billion in share buybacks over the past year, while Ford has not undertaken similar actions to date.

Conversely, GM anticipates achieving profitability in its EV segment by the end of this year, whereas Ford predicts significant profitability will only be realized with the launch of its second-generation EVs. Ford plans to provide a comprehensive update on its EV business outlook and profitability in the first half of next year.

Conclusion

Ford's recent earnings report showcases a mixed bag of results for the automaker. While it outperformed expectations in Q3, the lowered profit guidance has raised concerns among investors. The company must navigate supply chain disruptions and cost challenges as it strives to return to a growth trajectory, especially in the competitive landscape of the automotive industry.