Ford guides to low end of 2024 earnings forecast as it slightly tops Wall Street’s third-quarter expectations

DETROIT — Ford Motor guided to the low end of its previously announced 2024 earnings forecast as it slightly topped Wall Street’s third-quarter expectations.

The Detroit automaker said Monday it now expects adjusted earnings before interest and taxes, or EBIT, of about $10 billion. It had previously guided to between $10 billion and $12 billion. It retained its forecast for adjusted free cash flow of between $7.5 billion and $8.5 billion.

Heading into Monday’s results, several Wall Street analysts were concerned Ford would need to lower its forecast due to softening demand, rising vehicle inventory levels and worries about Ford’s ability to achieve an announced $2 billion in cost cuts this year.

“Our focus continues on cost and quality, which are holding back our progress and represent tremendous upside potential,” Ford CFO and Vice Chair John Lawler said Monday during a media briefing.

Lawler said Ford has achieved its $2 billion in material, freight and manufacturing costs, but higher inflationary and warranty costs have eaten into those improvements and have restricted the company “from having a record year.”

Here’s how the company performed in the third quarter, compared with average estimates compiled by LSEG:

• Earnings per share: 49 cents adjusted vs. 47 cents expected
• Automotive revenue: $43.07 billion vs. $41.88 billion expected

Shares of the automaker were down by roughly 5% during after hours trading after closing Monday at $11.37, up 2.7%.

The automaker was under pressure after a disappointing second quarter in which unexpected warranty costs caused the company to miss Wall Street’s earnings expectations.

Lawler said the company’s warranty costs in the third quarter were slightly lower than they were a year earlier after increasing by $800 million year over year during the second quarter.

“It’s an improvement, but it’s not as big as we would like to see,” Lawler said, declining to disclose the overall costs during the period.

Ford’s third-quarter results were led by its “Pro” commercial and fleet business as well as its traditional operations, known as “Ford Blue.” Blue reported adjusted earnings of $1.63 billion, while Pro earned $1.81 billion.

Lawler said Ford Pro and Blue operations are being impacted — and likely will continue to be affected — by some supplier problems, in part due to Hurricane Helene late last month.

Ford’s “Model e” electric vehicle unit recorded losses of $1.22 billion during the third quarter — less than it lost a year earlier largely due to lower volumes and cost cuts.

Ford CEO Jim Farley told investors Monday that the company continues to believe in its EV strategy; however the automaker has pulled back on many investments in the vehicles to focus on hybrid models.

Ford’s net income for the third quarter was $896 million, or 22 cents per share. Adjusted EBIT increased roughly 16% year over year to $2.55 billion. Ford’s 2023 third quarter included $41.18 billion in automotive revenue, net income of $1.17 billion, or 30 cents per share, and adjusted earnings before interest and taxes of $2.2 billion, or 39 cents per share.

Ford’s overall revenue for the third quarter, including its finance business, increased about 5% year over year to $46.2 billion. It marked the company’s 10th consecutive quarter of year-over-year revenue growth.

Farley noted that the company’s operations in China, where legacy automakers have increasingly struggled, have contributed more than $600 million to the company’s EBIT. That includes Ford’s plans to increase vehicle exports from the country.

Farley also addressed the company’s rising new vehicle inventory levels. Ford has 91 days’ supply of gross inventory, including vehicles in the company’s possession, and 68 days’ supply on dealer lots at the end of the third quarter, which has concerned investors.

He said the mix and price of those vehicles is “really good” and the company is holding back some inventory to assist with vehicle changeovers early next year.