Ford Motor Co.’s shares fell after the company warned that earnings this year will be at the low end of its forecast as the carmaker struggles to bring down high warranty costs.
Adjusted earnings before interest and taxes this year will be about $10 billion, down from a previous outlook for as much as $12 billion, the company said Monday. Analysts had expected $10.6 billion.
The tempered outlook highlights the widening gap between the Dearborn, Michigan-based carmaker and competitors including cross-town rival General Motors Co. Tesla Inc. shares soared last week after reporting a blowout third quarter, while GM raised its full-year profit forecast for the third time this year.
“We need to move faster, bottom line, and warranty needs to be a big part of that,” Ford Chief Financial Officer John Lawler said on a conference call with analysts. “We need to accelerate our pace to outrun what our competitors are doing.”
Ford’s shares sank as much as 10% as of 9:37 a.m. in New York on Tuesday, the largest intraday drop since July 25. The stock had declined 6.7% this year through Monday’s close.
“2024 has been a somewhat frustrating year for Ford investors,” JPMorgan analyst Ryan Brinkman said in a client note. High warranty expenses and other costs have “prevented the company from generating even stronger profits on account of positive market factors” such as vehicle pricing in the US, he said.
Third-quarter adjusted profit was 49 cents a share, matching analyst estimates. The quarterly results and updated outlook were “underwhelming,” Vital Knowledge analyst Adam Crisafulli said in a note to clients, “especially compared to the strong reports from GM and Tesla.”
In July, Ford shares plunged after the automaker reported a surge in warranty costs that caused it to fall short of profit estimates. Chief Executive Officer Jim Farley has taken drastic action to remedy the issue, even forgoing near-term profit by holding thousands of new models in parking lots around Detroit for extra quality checks.
During a call with reporters, Lawler characterized the quarter as “solid,” pointing to revenue growing 5% to $46.2 billion. But he said the company continues to struggle with getting costs under control, especially the expense of repairing quality problems on its vehicles.
