Ford Beats Q1 Profit Estimates, Warns of Opaque 2023 Outlook

Ford's Adjusted Earnings Per Share Far Exceed Estimates
Ford Bronco vehicles during the 2023 New York International Auto Show
Ford Bronco vehicles displayed during the 2023 New York International Auto Show on April 6. (Jeenah Moon/Bloomberg News)

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Ford Motor Co. beat first-quarter profit estimates on higher vehicle pricing and increased volumes, but left its full-year outlook unchanged over concern about pricing power and growing global economic uncertainty.

The automaker on April 2 posted adjusted earnings per share of 63 cents, far exceeding the 42 cents analysts estimated. That came in above the 38 cents it reported for the same period a year ago and 51 cents in the previous quarter.

For the year, Dearborn, Mich.-based Ford maintained its forecast of adjusted earnings before interest and taxes in a range of $9 billion to $11 billion, which it reiterated in March. Cross-town rival General Motors Co. in April boosted profit estimates for 2023 by $500 million to a range of $11 billion to $13 billion.

The unchanged outlook and concern about losses on its EVs kept a lid on investor sentiment. Ford Chief Financial Officer John Lawler said Ford didn’t raise guidance because it anticipates more pressure on pricing as industrywide sales volumes “normalize” following pandemic-related disruptions and parts shortages.

“We had a solid quarter for sure, but there’s a lot of the year in front of us,” Lawler said April 2 in call with reporters. “The macro economic environment is opaque at best.”

Ford shares fell as much as 3.7% in after-market trading on April 2 after reporting earnings. It traded down 1.6% as of 6:41 p.m. in New York. The stock had gained 1.5% so far this year through April 2’s close.

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For the first time, Ford reported results by business unit, rather than geography, after Chief Executive Officer Jim Farley radically restructured the 120-year-old company to increase focus on electric vehicles. The new-look balance sheet revealed Ford lost $722 million before interest and taxes in the EV business it calls Model e, while making $2.62 billion on its traditional gasoline-fueled models in its Ford Blue unit. It earned $1.37 billion on commercial vehicles and services in its Ford Pro business.

EV Push

Ford has said it expects to lose $3 billion on electric vehicles this year, matching the loss total from the previous two years.

Farley has a goal of achieving an 8% return on electric vehicles, before interest and taxes, by the end of 2026, when it plans to be building 2 million EVs annually. He also has said he plans to overtake Tesla Inc., which controls two-thirds of the U.S. market for battery powered cars. But that all has become more complicated as Elon Musk set off a price war by slashing prices on Tesla models.

Even after Ford cut prices on its electric Mustang Mach-e earlier May 2, the second time this year, Farley insisted that he won’t sacrifice profit for market share.

“We do not subscribe to a win-vehicle-share-at-any-cost approach,” Farley told analysts. “We will always balance a healthy profit roadmap.”

Farley is counting on Ford’s traditional combustion engine models such as F-Series pickup trucks and Bronco sport-utility vehicles to finance the $50 billion he plans to spend through 2026 to develop and build electric vehicles. But he has criticized the company’s legacy operations for being inefficient and is targeting $2.5 billion in cost cuts this year, including slashing thousands of jobs.

A Ford sign at a dealership in Springfield, Pa.

A Ford sign is shown at a dealership in Springfield, Pa. (Matt Rourke/Associated Press)

“It’s all about costs,” David Whiston, an analyst with Morningstar Inc. who rates the company the equivalent of a buy, said in an interview. “That’s why the stock has been languishing for so long.”

Ford’s EV momentum suffered a setback in the first quarter when it had to shut down production for five weeks of its F-150 Lightning plug-in pickup after one caught fire in a holding lot next to the plant in Dearborn. That, on top of the suspension of production of Mustang Mach-E to expand its Mexican factory, caused Ford to fall to the No. 5 seller of EVs in America, after finishing second to Tesla last year.

Even so, adjusted earnings before interest and taxes in the quarter came to $3.4 billion, compared to the $1.62 billion analysts expected, while revenue reached $41.5 billion, far more than the $36.2 billion projected by analysts.

Overall, Ford’s U.S. light vehicle sales rose almost 10% in the first quarter as it increased global production by 5%, including a nearly 32% boost in F-Series pickup production, following three years of pandemic-related parts shortages and shutdowns.

“They need a lot more EV products than just the Lightning and the Mach-E,” Whiston said. “And they need a much leaner cost base to fight Tesla.”

— With assistance from Ed Ludlow.

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