Ford Motor shares fell Monday after the close around 4.5% after the car giant warned investors, the company expect to incur an extra $1 billion in costs during the third quarter due to inflation and supply chain issues. Ford had reported better than expected second quarter earnings. $F now expects Q3 adjusted EBIT of $1.4-1.7 bln with 40,000-45,000 vehicles in inventory by end of Q3 lacking parts in short supply. The announcement comes after FedEx sold off heavily last week after guiding lower.
Ford Warn for Q3 2022
- Ford Motor (F) reaffirms FY22 adjusted EBIT of $11.5-12.5 bln;
- Expects Q3 adjusted EBIT of $1.4-1.7 bln;
- Expects 40,000-45,000 vehicles in inventory by end of Q3 lacking parts in short supply
- Primarily high-margin trucks and SUVs that haven’t been able to reach dealers.
- Ford reaffirmed its full-year guidance as expects to deliver the vehicles to dealers in the fourth quarter.
- F 14.93 ▲ 0.21 (1.43%) close today
- F 14.27 ▼ 0.66 (4.42%) After Hours.
Ford cited recent negotiations resulting in inflation-related supplier costs that will run about $1 billion higher than originally expected. The carmaker anticipates third quarter adjusted earnings before interest and taxes to be in the range of $1.4 billion to $1.7 billion.
Ford added that executives will “provide more dimension about expectations for full-year performance” when it reports its third-quarter results on Oct. 26.
GM warning
General Motor $GM on July 1 warned investors that supply chain issues would hurt its second-quarter earnings, noting it had about 95,000 vehicles in its inventory that were manufactured but lacked some components. GM at the time also reconfirmed its yearly guidance and said it expects that “substantially all of these vehicles” will be completed and sold to dealers before the end of 2022.
Ford Q2 2022 Earnings
Ford Second Quarter 2022 Earnings After Wednesday Close
$2.23 Missed EPS $2.29 Forecast and $51.9B Missed Revenue $52.45 Billion Forecast
Highlights
Ford earnings soared 423% to 68 cents crushing the 45-cent estimate. Revenue leapt 50% to $40.2 million, driven by “a 35% increase in wholesale shipments together with favorable pricing and vehicle mix.” Automotive revenue gains offsetting a decline in Ford Credit revenue.
- Q2 Adj EPS 68c, Est. 45c
- Q2 Automotive Rev. $37.9b, Est. $34.52b
- Generated free cash flow of $3.6 billion.
- Operating profit margins of 9.3%, up from 6.7% in the first quarter of 2022 and up from 3.9% in the second quarter of 2021.
- Still Sees FY Adj EBIT $11.5b to $12.5b, Est. $11.15b
- Still Sees FY Adj Free Cash Flow $5.5b To $6.5b
- Raised the quarterly dividend on Ford shares to 15 cents per share, up from 10 cents.
- The new Ford dividend is payable on Sept. 1 to shareholders of record as of Aug. 11.
- Ford saw a mark-to-market loss on its Rivian (RIVN) stake of $2.4 billion. It followed a $3.1 billion charge it took in the first quarter. Ford’s holdings in the startup are still worth more than the $500 million it originally invested.
“We’re moving with purpose and speed into the most promising period for growth in Ford’s history,” “We’re giving customers great experiences and value, improving our profitability and making Ford the next generation transportation leader.” Ford CEO Jim Farley said in an earnings release late Wednesday.
Market Reaction
Ford stock soared 5.2% in late trade after the earnings release. Before the release shares of Ford rose 3.6% to $13 amid a broad rally in regular trading on the stock market after the FOMC raised rates as expected.
GM and Tesla
GM stock also rose, gaining 3.1% to 34.36 Wednesday. Earlier on Wednesday, GM missed Q2 earnings views but also maintained 2022 guidance. GM said it expects “sharply” higher production and deliveries in the second half. Tesla stock rose 5.9%, extending its rally after TSLA reported Q2 earnings after the market close last Wednesday. $TSLA beat by $0.46 and reported revenues in-line and reaffirmed the expectation to achieve 50% average annual growth in vehicle deliveries over a multi-year horizon.
Lingering supply chain constraints rather than demand is hurting auto sales broadly, Ford’s Q2 U.S. sales rose 1.8%, defying a double-digit industry decline. Sales fell 22% in China, amid a Covid resurgence in the country and ongoing global supply chain disruptions.
The main takeaway is that supply chain issues and semiconductor shortages predictably undercut Ford’s sales in June. Looking ahead, semiconductor supply for the automotive industry should improve as chip makers shift their focus away from the slowing PC and smartphone end markets. However, new vehicle affordability is becoming a major concern, especially as concerns about the economy intensify.
Ford investors had been bracing themselves for some bad news, as illustrated by the stock’s tumble since late April. Therefore, today’s beat highlights the notable positives from the report.
Ford’s June Sales
Ford in its June sales report said the average transaction price climbed by about $1,900 per vehicle on a month/month basis, primarily due to strong sales of higher-priced F-Series, Explorer, and Navigator models. An important component of Ford’s strategy is to focus its sales efforts on its most profitable vehicles. The June sales report shows that the company is succeeding in that mission, which should help to curb inflationary pressures.
Demand for Ford’s electric vehicles remains very healthy with sales surging by 77% in June. Sparked by its popular F-150 Lightning and Mustang Mach-E models, Ford says that it was second only to Tesla (TSLA) in U.S. electric vehicle sales in June. Furthermore, with both F-150 Lightning and Mach-E dealer stock levels higher than last month, Ford is poised for an even stronger July.
Despite rising interest rates, higher cost of living expenses, and vehicle price increases, Ford is still not seeing a material slowdown in overall retail sales. The company stated that the number of retail sales coming from previously placed orders continues at its record pace of about 50% in June.
Ford has been aggressive in expanding its own lineup of electric vehicles, having recently started production of its own battery-powered pickup, the F-150 Lightning. The Lightning is a direct competitor to one of Rivian’s first models, the all-electric R1T pickup, which went on sale late last year.
Ford’s competition is strong with GM preparing to launch at least three more new EVs in 2023, growing its EV lineup that includes the Hummer truck and Cadillac Lyriq SUV. EV startup Rivian in which Ford still holds a stake after share sales, has a new electric SUV due later this year.
Outlook
Ford maintained 2022 guidance for adjusted EBIT of $11.5 billion-$12.5 billion, up 15%-25% from 2021. It continues to foresee adjusted free cash flow of $5.5 billion-$6.5 billion. Analysts polled by FactSet forecast Ford earnings of $1.92 per share in all of 2022, rising 21% from last year.
Ford’s outlook assumes 10%-15% growth in vehicle sales and continued strong pricing, offset by headwinds of $4 billion in commodity pricing. Ford now expects cost pressures totaling about $3 billion for the year, up by $1 billion from a quarter ago.
Ford also cited expectations for improved chip supplies, offset by its forecast for material headwinds of $4 billion. Last week ago, Ford announced a series of battery sourcing moves to reach its ambitious target of 600,000 electric vehicles annually by 2023 and more than 2 million EVs annually by 2026. By 2030, U.S. auto giants Ford, GM and Stellantis (Fiat Chrysler) (STLA) all aspire to have half their sales be electric cars, in a bold and risky shift away from traditional gas and diesel vehicles.
Rivian
Rivian’s stock was hit like most in the NASDAQ market however it has also been sliding that began earlier this year as the company has had to curtail factory production due to supply-chain challenges. EV makers have been under pressure to raise prices to counter fast-rising raw-materials costs for key battery inputs, such as lithium, cobalt and nickel.
After the lockup period for Rivian investors to sell stock after its initial public offering in November expired Ford sold about 8 million shares through Goldman Sachs. Ford is no longer partnering to develop an EV with Rivian, as had been planned under its initial investment in 2019 and wants to gradually reduce its stake in what has become a rival in the electric-truck market sources said.
Before the sale, Ford held about 102 million shares in Rivian overall, about 11.4% of the company. Ford and Rivian declined to comment.
The potential windfall from Ford’s stake in Rivian has plunged along with the stock price since the startup’s November IPO. In 2021, Ford said the rise in Rivian’s stock price resulted in an $8.3 billion paper gain. Rivian’s stock selloff was a drag on Ford’s first quarter, shaving $5.4 billion from its bottom line and resulting in a net loss for the auto maker.
Rivian reported around 83,000 reservations at the end of March, it is having trouble getting its factory in Normal, Ill., operating at full speed. The former Mitsubishi Motors Corp. plant can produce 150,000 vehicles a year but is currently producing around 1,000 of the vehicles a month.
On March 1 Rivian told customers with reservations for vehicles that it would have to increase prices retroactively, only to later walk back the price increase after the move stoked a backlash. The company still plans to increase prices for future purchasers, but only on reservations placed after March 1.
Rivian is the first automaker to bring a battery-electric pickup to market in the U.S. It’s also on track to make the most of its first-mover advantage when it starts deliveries of the R1S sport utility vehicle this year, giving it a lead in the market for full-size battery-electric SUVs and has an order of 100,000 EDVs from Amazon through 2025 the internet giant owns a 20 percent stake in Rivian.
Rivian has blamed its production woes on the global semiconductor shortage. In March, Rivian slashed its production plans for the year, saying it would aim to produce 25,000 vehicles this year, half of what it would have otherwise been able to build. Rivian also has a deal to supply 100,000 battery-powered delivery vans to Amazon.com Inc. Amazon was, like Ford another investor in Rivian. Amazon owned 17.74 million Rivian shares as of Dec. 31, according to FactSet. An Amazon spokesperson declined to comment on its holdings.
In September 2021, Rivian began making deliveries of its first-generation consumer vehicle, the R1T, a two-row five-passenger pickup truck priced at around $70,000. The company also plans to launch the R1S, a three-row seven-passenger SUV, in December 2021. At quarter-end, it had approximately 48,000 preorders for the consumer vehicles with $1,000 refundable deposits. In the commercial market, Rivian collaborated with key investor Amazon.com to develop an electric delivery van with an initial order volume of 100,000 vehicles.
Source Ford
From The TradersCommunity News Desk