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Ford says a lack of parts will impact third-quarter earnings, but not full-year earnings.
Bill Pugliano/Getty Images
Ford
Motor warned investors on Monday to expect lower deliveries and higher costs when third quarter numbers are reported.
Ford shares were down about 5.5% in after hours trading, but the update doesn’t seem as bad as investors’ initial reaction suggests.
The warning doesn’t indicate the economic sky is falling—just that it is still tough to source parts. Investors already know that.
Monday evening, Ford (ticker: F) said roughly 40,000 to 45,000 vehicles should be in inventory at the end of the third quarter because Ford doesn’t have the parts to finish them. Even worse, the unfinished vehicles are higher demand, higher margin products.
Ford expects to post operating earnings of $1.4 billion to $1.7 billion in the third quarter. Ford generated about $2.9 billion in second quarter operating profit and Wall Street is projecting about $2.9 billion in Q3 operating profit. It looks like a bad miss.
But Ford maintained its guidance for about $12 billion in full-year operating profit, despite third-quarter costs running about $1 billion “above plan.” Maintaining the full-year number should provide a cushion for shares in Tuesday trading. Investors, after all, have seen this situation before.
In the second quarter,
General Motors
(GM) didn’t finish about 95,000 vehicles due to lack of parts. GM announced the shortfall on July 1. The issue, just like Ford, ate into GM’s operating profit. But GM, just like Ford, didn’t change full year guidance.
GM expects to earn roughly $14 billion in operating profit this year.
GM shares opened lower on July 1, but closed the day up 1.4%. The
S&P 500
and
Dow Jones Industrial Average
were up 1.1% that day. Investors gave GM a pass, chalking the issue up to timing.
Tuesday trading will show if Ford investors do the same. The company will announce full third-quarter 2022 financial results on Oct. 26. Investors should get more details about parts shortages then.
