Ford Motor has adjusted its earnings forecast for 2024 down to the lower end of its previous estimates while slightly surpassing Wall Street’s expectations for the third quarter.
Here's ads banner inside a post
The Detroit automaker announced on Monday that it now expects adjusted earnings before interest and taxes (EBIT) of around $10 billion. Previously, Ford had forecast a range between $10 billion and $12 billion. The company also maintained its outlook for adjusted free cash flow between $7.5 billion and $8.5 billion.
Leading up to Monday’s results, several Wall Street analysts expressed concerns that Ford would need to lower its forecast due to weakening demand, rising vehicle inventory levels, and worries about the company’s ability to achieve its announced $2 billion in cost cuts this year.
“Our focus continues to be on cost and quality, which are holding back our progress and represent tremendous upside potential,” said John Lawler, Ford’s CFO and Vice Chair, during a media briefing. Lawler noted that Ford has achieved its $2 billion target in material, freight, and manufacturing costs, but higher inflation and warranty costs have eroded those improvements, restricting the company “from having a record year.”
Here's ads banner inside a post
Here’s how the company performed in the third quarter compared to average estimates compiled by LSEG:
- Earnings per share: 49 cents adjusted vs. 47 cents expected
- Automotive revenue: $43.07 billion vs. $41.88 billion expected
Shares of the automaker were down roughly 5% in after-hours trading after closing Monday at $11.37, up 2.7%.
The automaker faced pressure following a disappointing second quarter, during which unexpected warranty costs caused the company to miss Wall Street’s earnings expectations.
Here's ads banner inside a post
Lawler stated that the company’s warranty costs in the third quarter were slightly lower than they were a year earlier, after having increased by $800 million year-over-year during the second quarter. “It’s an improvement, but it’s not as big as we would like to see,” he said, declining to disclose overall costs during the period.
Ford’s third-quarter results were driven by its “Pro” commercial and fleet business as well as its traditional operations, known as “Ford Blue.” The Blue segment reported adjusted earnings of $1.63 billion, while Pro earned $1.81 billion.Lawler mentioned that Ford Pro and Blue operations are being affected — and likely will continue to be affected — by some supplier issues, partly due to Hurricane Helene at the end of September.
Ford’s “Model e” electric vehicle unit recorded losses of $1.22 billion during the third quarter — an improvement from the previous year, largely due to lower volumes and cost cuts.Ford CEO Jim Farley told investors on Monday that the company continues to believe in its EV strategy; however, it has pulled back on many investments in electric vehicles to focus on hybrid models.
Ford’s net income for the third quarter was $896 million, or 22 cents per share. Adjusted EBIT increased roughly 16% year-over-year to $2.55 billion. Ford’s third-quarter results for 2023 included $41.18 billion in automotive revenue, net income of $1.17 billion, or 30 cents per share, and adjusted earnings before interest and taxes of $2.2 billion, or 39 cents per share.
Ford’s overall revenue for the third quarter, including its finance business, increased about 5% year-over-year to $46.2 billion. This marked the company’s 10th consecutive quarter of year-over-year revenue growth.Farley noted that the company’s operations in China, where legacy automakers have increasingly struggled, contributed more than $600 million to the company’s EBIT. This includes Ford’s plans to increase vehicle exports from the country.
Farley also addressed the company’s rising new vehicle inventory levels. Ford had a 91-day supply of gross inventory, including vehicles in the company’s possession, and a 68-day supply on dealer lots at the end of the third quarter, which has raised concerns among investors.He stated that the mix and pricing of those vehicles are “really good,” and the company is holding back some inventory to assist with vehicle changeovers in early 2025.
Ford’s situation reflects the challenges that German automakers are facing amid fierce competition and declining market demand. The automotive world is experiencing significant changes, and Ford, one of the leading names, is no exception.With increasing pressure from multiple fronts, consumers are keenly watching Ford’s ability to maintain its competitive position in these turbulent times. Investors and employees are awaiting the company’s next moves in its quest for recovery and growth in the near future.
