Ford Motor reported a fall in Q2 earnings coming in short of Wall Street’s expectations while beating on revenue. This was due to warranty costs that have plagued the automaker for several years now. Ford Motor reported a dip in Q2 adjusted profit on Wednesday as the automaker continues to battle costly quality issues and an EV business that is weighing on its bottom line. This sent the Ford stock to tumble by 11% in after-hours trading.
Ford increased its full-year target for free cash flow but maintained its 2024 earnings guidance, disappointing some investors who had hoped for a hike. Ford’s guidance for the year includes adjusted earnings before interest and taxes, or EBIT, of between $10 billion and $12 billion.
Ford’s quarterly results
Here is how the company did, compared to estimates from analysts polled by LSEG:
Ford’s earnings per share: 47 cents adjusted vs. 68 cents expected
Ford’s revenue: $44.81 billion vs. $44.02 billion expected
Net income for the Q2 was $1.83 billion, or 46 cents per share, compared to $1.92 billion, or 47 cents per share, a year earlier. Adjusted EBIT declined 27% year over year to $2.76 billion, or 47 cents per share, compared to $3.79 billion, or 72 cents per share, during the second quarter of 2023.
Ford’s overall revenue for the Q2 2024, including its finance business, increased about 6% year over year to $47.81 billion.
Warranty cost a problem for Ford
As per Ford, the profit was affected by increases in its warranty reserves used to pay for vehicle issues. The costs are related to vehicles for the 2021 model year or older, Ford Chief Financial Officer John Lawler said during a media briefing.
Ford said recent initiatives to improve quality and vehicle launches are paying off and are expected to help bring down future warranty costs.
Lawler declined to disclose Ford’s total warranty cost for the second quarter but said it was $800 million more than the previous quarter.
Ford’s restructuring plans
Ford CEO Jim Farley told investors on Wednesday that his Ford+ restructuring plan remains on track to make the automaker more profitable.
“We are absolutely a different company than we were three years ago,” Farley said during the company’s earnings call, noting the “remaking of Ford is not without growing pains.”
Ford’s traditional business earnings
Ford’s traditional business operations, known as Ford Blue, earned $1.17 billion during the Q2, while its Ford Pro commercial business earned $2.56 billion. Its “Model e” electric vehicle unit lost $1.14 billion from April through June.
The Ford+ plan initially focused heavily on EVs when it was announced in May 2021 during the company’s first investor day under Farley, who took over the helm of the automaker in October 2020. It has since shifted to focus more on customer choice and next-generation EVs to drive profits.
Farley said Ford’s “more realistic and sharpened” EV plan, including focusing on a small next-generation EV platform, will prove worthwhile for the company in the years ahead.
Ford under pressure to raise guidance
“We don’t see the second half being much different than the first half, or falling off,” Lawler said. “There’s going to be puts and takes in any half of the year … that was part of our guidance, and we’re planning on managing that.”
There was pressure on Ford to raise its guidance after crosstown rival General Motors raised its yearly guidance Tuesday for the second time this year.
GM’s Q2 results also beat Wall Street’s top- and bottom-line expectations, but the automaker’s stock on Tuesday declined 6.4%.
Ford’s stock update
As of Wednesday’s close, Ford’s stock was up more than 10% this year, as pricing in the automotive industry has remained more resilient than expected, but some Wall Street analysts believe automaker profits may have peaked. Shares of the automaker were down about 11% after markets closed. The stock closed Wednesday at $13.67 per share.
