Ford Motor Company recently announced their earnings forecast for 2024, guiding to the lower end of their previous estimate. The Detroit-based automaker shared that they now expect adjusted earnings before interest and taxes (EBIT) to be around $10 billion, a slight adjustment from their initial guidance of $10 billion to $12 billion. Additionally, they maintained their forecast for adjusted free cash flow to be between $7.5 billion and $8.5 billion.
Concerns were raised by several Wall Street analysts prior to the announcement, speculating that Ford might need to revise its forecast due to softening demand, rising vehicle inventory levels, and uncertainties surrounding the achievement of $2 billion in cost cuts for the year. However, Ford’s CFO and Vice Chair, John Lawler, emphasized that the company’s focus remains on cost and quality improvements, which have the potential to drive progress and growth.
Despite facing challenges such as inflationary costs and warranty expenses, which impacted their ability to achieve a record-breaking year, Ford managed to slightly exceed Wall Street’s expectations for the third quarter. The company reported adjusted earnings per share of 49 cents, compared to the anticipated 47 cents, and automotive revenue of $43.07 billion, surpassing the expected $41.88 billion.
Following the earnings report, Ford’s shares experienced a 5% decline in after-hours trading, despite an initial 2.7% increase in closing stock price. This fluctuation was influenced by Ford’s disappointing second quarter results, where unexpected warranty costs led to a shortfall in earnings. Lawler acknowledged that while the third-quarter warranty costs were lower than the previous year, they did not meet the company’s desired levels of improvement.
The third-quarter performance was primarily driven by Ford’s commercial and fleet business, known as “Pro,” as well as its traditional operations under “Ford Blue.” Both segments reported solid adjusted earnings, with Pro earning $1.81 billion and Blue bringing in $1.63 billion. However, the company’s electric vehicle unit, “Model e,” recorded losses of $1.22 billion, reflecting reduced volumes and ongoing cost reduction efforts.
Ford’s CEO, Jim Farley, reiterated the company’s commitment to its electric vehicle strategy, despite scaling back investments in EVs to prioritize hybrid models. Farley highlighted the resilience of Ford’s operations in China, contributing over $600 million to the company’s EBIT and supporting plans for increased vehicle exports from the region.
Looking ahead, Ford aims to manage its vehicle inventory levels strategically, with 91 days’ supply of gross inventory and 68 days’ supply on dealer lots at the end of the third quarter. This approach includes holding back some inventory to facilitate vehicle transitions in early 2025, indicating a proactive stance towards operational efficiency and market dynamics.
