Ford Motor Co. (F) shares plummeted on Tuesday after the Detroit-based automaker’s third-quarter earnings report revealed a less-than-stellar outlook, particularly for its electric vehicle (EV) segment. Despite strong revenue growth, investors were spooked by the company’s revised earnings forecast and the challenges it faces in the competitive EV market.
Revenue Rises, But Profits Falter
Ford reported total revenue of $46.2 billion for the quarter, exceeding analyst estimates of $41.88 billion. This represents a 5% year-over-year increase. Sales for Ford Blue, the company’s traditional gasoline-powered vehicle division, rose by 3% to $26.2 billion. Ford Pro, which focuses on commercial vehicles, saw a 13% jump in sales to $15.7 billion.
However, the star performer, Ford Model e, which encompasses the company’s EV offerings, experienced a steep 33% decline in sales compared to the previous year. This segment also recorded an EBIT (earnings before interest and taxes) loss of $1.2 billion.
Pricing Pressure and Rising Costs Weigh on Profits
Ford’s CEO Jim Farley attributed the struggles in the EV segment to intense pricing pressures and heightened competition. He pointed out that aggressive lease tactics by rivals, combined with overcapacity in the market and the influx of new EV models, have created a price war. Farley also highlighted the impact of rising costs, particularly in warranty expenses, on the company’s earnings.
Guidance Cut and Stock Plunge
The challenging market conditions led Ford to revise its full-year adjusted EBITDA guidance downwards. The company now expects EBITDA of around $10 billion, compared to its previous forecast of $10 billion to $12 billion. While Ford Pro is expected to contribute $9 billion and Ford Blue $5 billion to the full-year EBITDA, the Ford Model e segment is projected to incur a loss of around $5 billion.
The gloomy outlook sent Ford’s stock tumbling by 9.19% to $10.33 per share. Analyst sentiment mirrored the market’s reaction, with Barclays analyst Dan Levy maintaining an Overweight rating but lowering the price target from $14 to $13. RBC Capital analyst Tom Narayan reiterated a Sector Perform rating and kept the price target at $10.
Ford’s third-quarter results underscore the challenges facing automakers as they navigate the rapidly evolving EV landscape. The company’s struggle to find profitability in its EV division raises questions about its long-term strategy in a fiercely competitive market.
