Ford Shares Drop 14% After Q2 Earnings Miss Projections

Ford Motor Company’s shares experienced a significant decline of 14% on Thursday following the release of its second-quarter earnings, which fell short of analyst projections. The drop pushed the company’s stock price below $12, marking a near nine-month low and erasing previous gains made throughout the year. This downturn also mirrored a broader decline in other automotive stocks.

During premarket trading, Ford’s shares fell below $12 at around 9:20 a.m., signaling what could be the automaker’s most severe loss since October 27. On that date, Ford’s stock plunged 12% to below $10 after the company highlighted potential losses from its electric vehicle (EV) division and a new agreement with the United Auto Workers union.

The recent fall in Ford’s stock stands in stark contrast to its performance earlier this week, when it had gained 12% by the close of trading on Wednesday. This came after achieving a 52-week high of $14.85 last week. As of the latest reports, the stock’s performance this year has turned negative, despite earlier gains.

For the second quarter, Ford reported adjusted earnings per share (EPS) of 47 cents, falling significantly short of the 68 cents expected by analysts, according to data from FactSet. The company attributed its diminished profitability to increased funds allocated for warranty claims, with Chief Financial Officer John Lawler explaining that issues have arisen with some of Ford’s older models. This includes manufacturing problems for vehicles produced in 2021 and later.

Despite the earnings miss, Ford’s overall revenue for the quarter reached $47.8 billion, marking a 6% increase compared to the same period last year. However, the positive revenue growth was overshadowed by the disappointing earnings figures and ongoing concerns about the company’s electric vehicle segment.

One of the most significant contributors to Ford’s earnings miss is its electric vehicle business, which reported losses of $1.14 billion for the three months ending in June. The company has projected that losses from this unit could reach up to $5.5 billion for the year. This is a stark contrast to the $4.7 billion loss reported for the entire year of 2023, attributed to an “extremely competitive price environment.”

The negative news for Ford also had a ripple effect on the broader automotive industry. Shares of Stellantis, the parent company of brands like Jeep, Dodge, and Chrysler, fell by 8% on Thursday. Stellantis reported a net profit of just over $6 billion for the first half of the year, which represents a 48% decrease compared to the same period last year. Similarly, General Motors saw its shares decline by 2% following its earnings announcement.

Despite an increase in earnings projections for the year—from between $9 and $10 per share to between $9.50 and $10.50 per share—GM faced cautionary notes from Morgan Stanley analyst Adam Jones. Jones suggested that GM’s stock might have reached its peak for the year due to declining interest in electric vehicles.

Ford CEO Jim Farley has previously indicated that the company would “reassess” its electric vehicle business in light of the anticipated increase in losses. Last week, Ford announced plans to invest approximately $3 billion to boost production of its F-Series trucks at various facilities in the U.S. and Canada, including an Ontario plant. However, this investment comes with a shift in strategy: Ford will halt the development of a new three-row electric SUV at the Ontario plant, redirecting its efforts to an unspecified alternative facility. The company may also postpone the introduction of its next-generation electric vehicles until profitability can be assured. This move comes amidst a challenging market for electric vehicles, characterized by lower used car prices and a shortage of charging infrastructure, as highlighted by Goldman Sachs.

Ford’s financial performance and stock market reaction reflect broader trends within the automotive sector, where companies are grappling with fluctuating consumer interest in electric vehicles and evolving market conditions. The substantial drop in Ford’s shares underscores the significant impact that earnings reports and strategic decisions can have on investor sentiment and stock performance.