Ford Beats Q1 Profit Estimates, Warns of Opaque 2023 Outlook
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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.
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 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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