Ford (NYSE:F) has released its second-quarter 2023 earnings report, which showcased impressive results and exceeded market expectations. The company reported adjusted earnings of 72 cents per share, beating the consensus estimate of 51 cents and increasing from 68 cents in the year-ago quarter. The outperformance was driven by higher-than-expected automotive revenues, with the company’s consolidated second-quarter revenues reaching $44,954 million, representing an 11.8% increase year over year. Despite these strong results, Ford stock plunged by more than 4% in early trading Friday.
Ford reports its automotive results under three business segments: Ford Model e, Ford Blue, and Ford Pro. Ford Blue focuses on the firm’s legacy gas-powered business, while Ford Model E centers around EVs, advanced technologies, and supporting electrification plans. Ford Pro is dedicated to commercial vehicles and services.
In the second quarter, Ford Blue’s total wholesale volume increased by 7% year over year to 720,000 units, in line with forecasts. Revenues from this segment rose by 5% year over year to $25 billion, surpassing estimates. Earnings before interest and taxes (EBIT) reached $2,308 million, with an EBIT margin of 9.2%, exceeding projections due to effective cost-containment efforts.
In the Ford Model E segment, total wholesale volume grew by an impressive 44% year over year to 34,000 units, while revenues increased by 39% year over year to $1.8 billion. However, the segment reported a loss before interest and taxes of $1,080 million, with a negative EBIT margin of 58.9%. The wider loss can be attributed to higher-than-expected costs in developing technologically advanced products.
Ford Pro’s total wholesale volume also saw a notable 8% increase year over year to 365,000 units, exceeding expectations. Revenues from this segment grew by 22% year over year to $15.6 billion, with an EBIT of $2,391 million and an EBIT margin of 15.3%.
Overall, Ford’s total automotive revenues amounted to approximately $42,427 million, surpassing estimates due to stronger-than-expected deliveries in the Ford Model E and Ford Pro units.
Ford Credit, the company’s financial services arm, reported second-quarter revenues of $2,527 million, up 12% year over year, outperforming expectations. However, pretax earnings decreased to $390 million from $939 million in the year-ago quarter, mainly due to reduced financing margins, the absence of credit loss reserve releases, and decreased residual values of leased vehicles.
Regarding its financial position, Ford reported adjusted free cash flow (FCF) of $2,919 million during the quarter. As of June 30, 2023, the company had $26,406 million in cash and cash equivalents. The long-term debt, excluding Ford Credit, stood at $19.17 billion at the end of the second quarter.
Looking ahead, Ford has raised its guidance for 2023 adjusted earnings before interest and taxes (EBIT) to the range of $11-$12 billion from the previous $9-$11 billion projection. Adjusted free cash flow is now anticipated to be in the range of $6.5-$7 billion, higher than the previous forecast of $6 billion. Ford expects 2023 EBIT from Ford Blue and Ford Pro to reach around $8 billion each, up from the earlier projection of $7 billion and $6 billion, respectively. However, Ford Model E is anticipated to incur a pretax loss of around $4.5 billion this year, wider than the prior expectation of a loss of around $3 billion. EBIT from Ford Credit is estimated to be around $1.3 billion.
In conclusion, Ford’s strong second-quarter performance, driven by robust automotive revenues and cost-containment efforts, reflects the company’s resilience in the ever-evolving automotive industry. The company’s positive outlook for 2023, with raised guidance for EBIT and FCF, indicates confidence in its ability to navigate market challenges and continue on its growth trajectory. Investors have responded positively to Ford’s earnings report, and the company’s strategic focus on EVs, advanced technologies, and commercial vehicles positions it favorably for future success. Ford stock has gained 12.6% year-to-date.
Featured Image: Unsplash @ FourFour
