Ford Earnings Miss Estimates. The Stock Is Slumping as Strike Costs Start to Bite.

Wall Street was looking for operating profit of $2.6 billion and earnings per share of 46 cents from sales of $43.9 billion. A year ago, Ford reported operating profit of $1.8 billion and EPS of 30 cents from $39.4 billion. Supply-chain problems constrained Ford’s production at points in 2022.

Results improved year over year but still missed the Street’s expectations. Ford shares were down 9.8% in midday trading Friday. The S&P 500 was flat. The Dow Jones Industrial Average was off 0.5%.

Ford’s commercial business, called Ford Pro, was the standout in the quarter, reporting operating income of just under $1.6 billion and a profit margin of 12%. The traditional car business, called Ford Blue, earned about $1.7 billion and a margin of about 7%.

Ford’s EV business, called Model e, reported a $1.3 billion loss on sales of 36,000 vehicles for a per-vehicle loss of about $36,000. The business lost $1.1 billion in the second quarter on sales of 34,000 vehicles. That was a per-vehicle loss of about $32,000.

Ford has shipped about 70,000 EVs over those two quarters. The lack of manufacturing scale and heavy investment in future EV products are partly responsible for the losses.

Weak profitability in the Model e division is also due in part to lower pricing.
Tesla
(TSLA), the EV leader globally and in the U.S., has cut prices for its EVs aggressively in 2023.

“The transition to EVs is well under way,” said CFO John Lawler, adding sales and penetration rates are improving even if at a slower-than-hoped-for rate.

That slowness is resulting in $12 billion in capital spending being postponed. A battery plant in Kentucky will be delayed in order to balance supply and demand, while production of the Mustang Mach E production is slowing down.

It isn’t only Ford feeling the pinch.
General Motors
(GM), on Tuesday, reported better-than-expected operating third-quarter profit but also spoke cautiously about EVs.

Battery-electric vehicle sales in the U.S. are still hitting records. Some 313,000 were sold in the third quarter, but Ford and GM’s share of that amounted to about 13%, down 3 percentage points from a year earlier.

Ford withdrew its guidance for the full year, pending ratification of the tentative agreement reached with the striking United Auto Workers on Oct. 25. In July, Ford guided to operating profit of $11 billion to $12 billion. Wall Street is modeling $11.2 billion. Ford reported a 2022 operating profit of $10.4 billion.

Ford earned about $9.4 billion in the first nine months of the year. The company was on track to hit guidance but then came the strike.

Impacts are still accumulating, even though there is a tentative agreement. The third quarter impact was only about $100 million. The strike started relatively small and began on Sept. 15. There is already a $1.2 billion impact on operating profit for the fourth quarter, said CFO John Lawler.

Looking ahead, Lawler said the impact of the new contract amounted to a few hundred dollars per vehicle.

Coming into Thursday trading, Ford stock was down about 10% over the past 12 months, while the
S&P 500
and
Dow Jones Industrial Average
were up about 9% and 4%, respectively.

Labor issues have weighed significantly on investors’ sentiment. Ford stock was down about 25% since the start of July when UAW news started to heat up. The S&P 500 was down about 6% over the same span.

Corrections & Amplifications: Ford had $43.8 billion in third-quarter sales. An earlier version of this article incorrectly reported the number as $39.4 billion, the result for the third quarter of 2022.

Write to Al Root at [email protected]