A Ford Bronco on display at the New York International Auto Show on March 28, 2024.
Danielle DeVries | CNBC
DETROIT – Ford Engine leads a decline in major U.S. auto stocks this week amid disappointing results and investor skepticism about future performance.
Ford shares fell more than 17% in early trading Thursday, on track for their worst drop since 2009, after missing Wall Street's earnings expectations due to warranty problems, a recurring issue at the company.
Actions of General Motors and Stellantis They also fell sharply after reporting their results this week. Shares of Teslawhich reported its results on Tuesday afternoon, rose slightly on Thursday after its biggest daily drop since 2020 on Wednesday.
The traditional “Detroit” automakers (Ford, GM and Stellantis) were punished in part because of industry-wide uncertainty, but more in response to individual problems.
GM, which has fallen about 7% this week, beat Wall Street expectations for the second quarter and raised its outlook for the year. Wall Street was impressed with the quarter, but investors were wary of setbacks in growing businesses, diminishing upside potential during the second half of the year and fears that the automaker’s earnings power has peaked.
Stellantis reported “disappointing” first-half results, CEO Carlos Tavares described them Thursday morning, largely due to ongoing problems at its North American operations.
The company's New York Stock Exchange-listed shares fell nearly 10% in morning trading, trading near a 52-week low set in August of $17.57 a share.
Ford, GM, Stellantis and Tesla stock performance amid this week's earnings reports.
Despite the current problems, Stellantis reconfirmed its 2024 guidance which includes a double-digit adjusted operating profit margin, positive industrial free cash flow and at least €7.7 billion in capital returns to investors in the form of dividends and buybacks.
“It's a very tough industry, we're in a very difficult period and we all have to fight for performance,” Tavares said. “We'll have to work hard to deliver that performance.”
Ford executives made similar comments as they reconfirmed their 2024 outlook despite falling 21 cents short of expectations for adjusted earnings per share. The automaker reported an additional $800 million in unexpected warranty costs compared with the previous quarter.
Ford's 2024 outlook includes adjusted earnings before interest and taxes, or EBIT, of $10 billion to $12 billion.
Several Wall Street analysts expressed frustration over Ford's resurgence of warranty costs, but many were still optimistic about the company's underlying business operations.
Most notably, Morgan Stanley's Adam Jonas kept Ford as the company's “top pick,” while downgrading GM to “equal weight” from “overweight,” despite the Detroit automaker's excellent quarter.
“Impressive results considering the big losses in EVs, Cruise and China. History suggests the good times won't last,” Jonas said Tuesday in a note to GM investors.
Jonas said the company sees further growth potential at Ford, “although our conviction is being tested by ongoing challenges… many of which we believe are within management's control.”
Shares of US electric vehicle leader Tesla closed down 12% on Wednesday after the electric vehicle maker reported weaker-than-expected quarterly earnings and another drop in automotive revenue.
– CNBC Michael Bloom and Lora Kolodny contributed to this report.
