Ford Motor Company (NYSE:F), the world’s largest automaker, issued an enormous $1 billion profit warning late on Monday due to rising parts costs. In the camp of large, unpleasant third-quarter financial pre-announcements, FedEx has made a buddy with Ford. The firm attributed this to vendor inflation. Ford now expects adjusted operating profits for the third quarter to be in the $1.4 billion to $1.7 billion range, significantly less than the $3 billion Wall Street forecast.
Ford Motor Company Profit Projection
Ford Motor Company reiterated its full-year operating profit projection of $11.5 billion to $12.5 billion, which seems unusual given the severe warning. The revelation caused the price of Ford Motor Company (NYSE:F) to fall, and GM and Tesla shares also declined in sympathy. Given the generally bullish comments on demand and the bottom line made when second-quarter earnings were announced in late July, the attitude on Wall Street is that Ford’s caution is a bombshell. The Street is currently rushing to reduce profit and valuation projections for the company.
Evercore ISI analyst Chris McNally said, “Vehicles in transit will be perceived as transient, but unexpected inflation is always troubling.” He added that he anticipates Ford’s stock falling to roughly $13 after the quarterly letdown. Itay Michaeli from Citi also seemed astounded by Ford’s warning. Check out his research note quickly below.
Target Price: $16
Score: Neutral (reiterated)
Assumed increase in stock price: +14%
According to Michaeli, Ford’s stock is probably headed for a short-term decline. The surprising $1 billion headwind and the increased reliance on a successful Q4 will likely weigh on the shares, even though the Q3 guide-down has no impact on the fiscal year forecast. According to Michaeli, demand for Ford’s automobiles hasn’t decreased.
“Ford’s Q3 guide-down indicates ongoing supply-chain limitations (Ford Motor Company (NYSE:F) noted broad supply-chain issues to us) and inflationary pressures, but does not seem to reflect a demand issue,” said the analyst. It indicates a better price/mix than was previously advised. Despite this, our initial impression is that the Q3–Q4 walk will cause many to fall within Ford’s fiscal year 2022 range of $11.5–$12.5 billion (Citi $11.8 billion).
Ford Motor Company Warning to General Motors
“At this time, the thorough read-through to GM is unclear because it depends on how a company- or industry-specific Ford’s guide-down is. Examining the three things mentioned above: (1) On the 40-45k units, GM experienced a similar problem last quarter while Ford Motor Company (NYSE:F) did not; hence, it is probable that Ford’s Q3 issue is company-specific, though this is not yet known. Regardless, we don’t think this is the most important topic under discussion right now because supply-chain dangers are well-known. (2) The $1 billion in additional Q3 costs will probably draw the most significant attention because they are unexpected, especially in light of Ford’s prior $3 billion inflation forecast for ’22 and what we understand to be reasonable supplier negotiation lead times.
“If GM encounters a comparable headwind, it might lessen or perhaps erase any H2 gain potential resulting from solid price/mix while raising doubts about what caused this headwind to appear so suddenly. The read to GM from this could turn positive on either better execution or at least increased prudence on the cost projection if GM doesn’t end up facing a similar headwind.
Ford Motor Company (NYSE:F) CEO Jim Farley attended Monterey Car Week in late August, according to the Yahoo Finance Live archive.
The corporation will have two businesses, one devoted to creating gas-powered vehicles and the other to making electric ones, as Farley stated.
Farley said, “I don’t understand why other people wouldn’t do it,” Pras Subramanian of Yahoo Finance reported. “I witnessed the company struggle; I saw a transmission engineer learning about batteries. [The shift] was going to take too much time, we don’t have time, and we’re way behind. So we need to specialize in catching up and passing. I have no idea how we would accomplish this change if we didn’t specialize.
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