Ford's display at the New York International Auto Show on March 28, 2024.
Danielle DeVries | CNBC
DETROIT — Ford Engine missed Wall Street's second-quarter profit expectations but beat them on revenue, due to warranty costs that have plagued the automaker for several years.
The automaker raised its full-year free cash flow target but maintained its 2024 profit forecast, disappointing some investors who had hoped for an increase. Ford’s forecast for the year includes adjusted earnings before interest and taxes, or EBIT, of between $10 billion and $12 billion.
The automaker's stock fell about 11% after the close of trading. The stock closed Wednesday at $13.67 per share.
Here's how the company fared, compared to estimates from analysts surveyed by LSEG:
- Earnings per share: 47 cents adjusted versus 68 cents expected
- Automotive sector revenues: $44.81 billion versus the expected $44.02 billion
The Detroit automaker said its profitability was hurt by increases in its warranty reserves used to pay for vehicle problems. The costs are related to vehicles from the 2021 model year or earlier, Ford Chief Financial Officer John Lawler said during a news conference.
Ford said recent initiatives to improve quality and vehicle launches are paying off and are expected to help reduce future warranty costs.
“We are making real progress in improving quality, reducing costs and reducing complexity across our business,” Lawler said during a press conference. “We are making real progress on quality that will benefit us in the future.”
Lawler declined to disclose Ford's total warranty cost for the second quarter, but said it was $800 million more than the previous quarter.
Performance of various automotive stocks in 2024.
Second-quarter net income was $1.83 billion, or 46 cents per share, compared with $1.92 billion, or 47 cents per share, a year earlier. Adjusted EBIT decreased 27% year-over-year to $2.76 billion, or 47 cents per share, compared with $3.79 billion, or 72 cents per share, in the second quarter of 2023.
Ford's overall second-quarter revenue, including its finance business, rose about 6% year over year to $47.81 billion.
Ford Chief Executive Jim Farley told investors Wednesday that his Ford+ restructuring plan remains on track to make the automaker more profitable.
“We are a completely different company than we were three years ago,” Farley said during the company's earnings call, noting that “Ford's restructuring is not without its challenges.”
Ford's traditional commercial operations, known as Ford Blue, earned $1.17 billion during the second quarter, while its Ford Pro commercial business earned $2.56 billion. Its “Model e” electric vehicle unit lost $1.14 billion between April and June.
The Ford+ plan initially focused heavily on electric vehicles when it was announced in May 2021 during the company’s first investor day under Farley, who took the helm of the automaker in October 2020. It has since shifted to focus more on customer choice and next-generation EVs to drive earnings.
Farley said Ford's “more realistic and refined” EV plan, which includes focusing on a small next-generation EV platform, will prove valuable to the company in the years ahead.
As of Wednesday's close, Ford shares were up more than 10% this year as prices across the auto industry have remained more resilient than expected, but some Wall Street analysts believe automaker profits may have peaked.
“We don't think the second half will be much different than the first half, or that it will decline,” Lawler said. “There are going to be ups and downs in either half of the year… that was part of our guidance and we plan to manage that.”
There was pressure on Ford to raise its forecasts after its crosstown rival… General Motors raised its annual guidance on Tuesday for the second time this year.
GM's second-quarter results also beat Wall Street expectations for revenue and profit, but the automaker's shares fell 6.4% on Tuesday.
