Ford's Q3 Earnings: Revenue Growth but Lowered Full-Year Profit Forecast

Stock Market29/10/2024Mr. SmithMr. Smith
General Motors Auto Stock

Ford Motor Company (Ford) recently released its third-quarter earnings, reporting a rise in revenue but adjusting its full-year profit outlook to the lower end of previous forecasts. The automaker's earnings announcement follows General Motors (GM)' impressive third-quarter performance, which led to an upgraded annual profit forecast.

Third-Quarter Financial Highlights

Ford reported revenue of $46.2 billion, surpassing the forecasted $41.9 billion but slightly lower than the $47.8 billion achieved in the previous quarter. This quarter’s revenue also marks a 5% increase over the $43.8 billion recorded in the same period last year. Ford’s adjusted earnings per share (EPS) came in at $0.49, matching analyst expectations, while net income was reported at $900 million. This figure was affected by a previously disclosed $1 billion charge related to electric vehicles (EVs).

Despite higher revenue, Ford revised its profit forecast for the year. The company now anticipates its 2024 adjusted EBIT (earnings before interest and taxes) to be approximately $10 billion, which is at the lower boundary of the earlier range of $10 billion to $12 billion.

Performance of Ford Business Divisions

Ford has structured its operations into three primary divisions as part of the Ford+ strategy: Ford Blue for traditional gasoline-powered vehicles, Model e for electric vehicle production, and Ford Pro for commercial vehicles. Below is a breakdown of each division's performance in the third quarter:

  • Ford Blue: Reported revenue of $26.2 billion and EBIT of $1.627 billion.
  • Ford Model e: Generated revenue of $1.2 billion, with an EBIT loss of $1.224 billion.
  • Ford Pro: Brought in revenue of $15.7 billion with EBIT of $1.814 billion.

Ford’s electric division, Model e, continues to operate at a loss, with projected full-year losses of $5 billion. However, CEO Jim Farley is optimistic, attributing expected cost reductions to shifts in battery production and supply chain strategies. Farley emphasized that refining battery sourcing would help improve production tax credits and lower overall expenses for Ford’s initial EV lineup.

Challenges and Market Reactions

Ford has encountered supply chain disruptions affecting its Ford Pro and Ford Blue divisions. John Lawler, Ford’s CFO, cited issues related to recent hurricanes in the southern United States that impacted suppliers. Despite these challenges, Lawler sees a positive future for Ford as it continues to manage warranty costs and optimize profitability.

The market reacted swiftly to the revised forecast, with Ford stock dropping over 9% during Tuesday trading. Ford has yet to match GM's aggressive approach to share buybacks and dividend repurchases, with General Motors having allocated $16 billion for shareholder returns over the past year.

Electric Vehicle (EV) Performance and Future Outlook

Ford’s EV sales rose 12% year-over-year, driven by the popularity of models like the Ford Lightning pickup and the Ford E-Transit van. Additionally, sales of hybrid vehicles surged 38% year-over-year, led by the Ford Maverick pickup truck. Despite these advances, Ford anticipates reaching profitability in its EV segment only with its second-generation EV lineup, set for evaluation in early 2025.

Conversely, General Motors has projected that its EV segment will reach a positive variable profit margin by the end of the year, a milestone Ford does not expect until its next generation of electric models is launched.

Ford's Strategic Path Forward

Ford’s future trajectory includes several critical strategies aimed at stabilizing and enhancing profitability. Farley highlighted the importance of optimizing battery sourcing, managing labor costs, and reducing warranty expenses to improve financial stability. Ford plans to provide a comprehensive update on its EV business and profitability projections in the first half of 2025, a much-anticipated announcement for both investors and industry analysts.

As Ford navigates a challenging automotive landscape, the focus remains on long-term growth and sustainable profitability. With the automotive industry facing shifts toward electrification and supply chain realignment, Ford's adaptation to these trends will be crucial in maintaining its competitive edge in the years ahead.

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