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Ford Motor Co. shares are trading lower in the pre-market Tuesday after it told investors to expect 2024 earnings to hit the low end of its forecast.
On Monday, the Detroit automaker said it expects adjusted earnings of roughly $10 billion for the full year. Its prior forecast had called for earnings of between $10 billion and $12 billion. The company also maintained its forecast for adjusted free cash of between $7.5 billion and $8.5 billion.
For the July to September quarter, Ford recorded revenue of $46 billion, a 5% year-over-year increase, marking its 10th quarter in a row of growth. Net income was down $0.3 billion to $0.9 billion, partially thanks to its plans to make its next three-row SUVs hybrids rather than fully electric as planned. Adjusted earnings grew 16% to $2.55 billion.
“Clearly, our strategic advantages are not falling to the bottom line the way they should,” CEO Jim Farley said Monday on an earnings call. “Costs, especially warranty, has held back our earnings power.”
J.P. Morgan (JPM+1.32%) analysts on Tuesday downgraded their price target for Ford to $14 per share from $15 per share, acknowledging that “2024 has been a somewhat frustrating year for Ford investors.” Ford stock was down by 6.7% year-to-date heading into Tuesday; shares have dropped 7% in pre-market trading. Comparatively, rival General Motors’ shares are up 46% for the year so far and the S&P 500 is up 22% year-to-date.
The analysts pointed to Ford’s high warranty expenses, which the company said improved in the third quarter compared to the second, when unexpectedly high warranty costs caused an earnings miss. CFO John Lawler said Monday that higher-than-expected warranty costs and inflationary costs impacting Ford’s Otosan business in Turkey have prevented record adjusted earnings this year. That’s despite being on track with a $2 billion cost-cutting plan.
The company’s commercial and fleet business and traditional operations, named “Pro” and “Ford Blue, respectively, accounted for most of the company’s earnings. The Pro division reported earnings of $1.81 billion, while Blue earned $1.63 billion.
Operations at those companies have been affected by supplier problems, in part due to Hurricane Helene and Hurricane Milton, Ford said. There have also been issues with a “certain supplier” that is causing problems for Ford Blue, Lawler said, adding that Ford thinks they will be resolved by the end of the fourth quarter.
Ford’s electric vehicle division, Model e, reported a loss of $1.22 billion, an improvement to the $1.8 billion it lost during the same time in 2023. The automaker plans to launch a new low-cost platform in 2027 while shifting some work from overseas to the U.S. in order for its vehicles to qualify for EV tax credits.
“In 40 years in the industry, I’ve seen a lot of game-changer products,” Farley said, calling a planned midsize electric pickup “one of the most exciting” and adding that “it matches the cost structure of any Chinese auto manufacturer building in Mexico in the future.”
Although Farley expressed optimism for Ford’s EV business, the company is also focusing on hybrids, which have been more popular than Ford expected. In May, Farley described hybrids as less of a transitionary tool to get more EVs on the road and instead as just another permanent class of vehicles in the mix.