Due to the labor stoppage, it is understandable why Ford (F) reported
mixed third-quarter earnings. But it doesn't explain why the Dearborn,
Michigan-based automaker joined GM in pulling its full-year guidance, even
after reaching a tentative labor contract deal with the United Auto Workers
(UAW). Something even bigger does.
After-hours trading caused a price drop in Ford shares following the
release of the third-quarter results. The company's top-line revenue of
$43.8 billion beat the estimated $41.21 by 11%. However, it substantially
dropped from the $45.0 billion Q2 top-line earnings. The difference equates to
a decrease in the adjusted earnings per share of $0.47 to $0.39.
Ford reported the company had earned $9.4 billion in adjusted earnings
for interest and taxes (EBIT) toward its full-year target of $11 billion to $12
billion. However, Ford claims the UAW strike and the ratification of the
tentative agreement with the UAW is why the company is withdrawing its guidance
for full-year 2023 operating results.
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The Q3 Report
Even more interesting, Q3 represents the third time Ford reported
performance across its three primary business lines: Ford Pro for its
commercial and Super Duty trucks business, Ford Blue for gas-powered cars, and
Ford Model e for its EV business. The results are as follows.
Ford Pro
- Revenue: $13.8
Billion vs. $14.65 billion estimate
- EBIT: $1.65
billion vs. $2.16 billion estimate
Ford Blue
- Revenue: $25.6
billion vs. $23.93 billion estimate
- EBIT: $1.72
billion vs. $194 billion estimate
Ford Model e
Revenue: $1.8
billion vs. $2.34 billion estimate
EBIT loss: $1.33 billion vs. $1.27 billion estimate
Since it is supposed to be the flagship for the future, the Model e EV business of $1.33 billion stands out as an indicator of extended troubles in that area. Ford attributes the loss to its investment in next-gen vehicles. According to a company statement, "Many North American customers interested in buying EVs are unwilling to pay premiums for them over gas or hybrid vehicles, sharply compressing EV prices and profitability."
As a result, Ford CFO John Lawler is hesitant to publicly commit to a steady course forward for its upcoming Blue Oval City EV and battery plant, especially since Ford projected a $4.5 billion loss for the unit in the last quarter of 2023. Although EV sales were up 14.8% in the third quality, Ford will be looking hard at its EV cost price dilemma. This challenge may be difficult to overcome since it's apparent they have hit a price ceiling on these units.
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