What To Expect From Ford In Q3?

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Ford (NYSE:F) is expected to publish its Q3 2022 results on October 26, reporting on a quarter that likely saw the company’s deliveries pick up, although profitability could be weighed down by supply chain headwinds and cost pressures. We expect revenue to remain almost flat year-over-year at around $36.1  billion in Q3, roughly in line with the consensus estimates. Earnings are likely to come in at about $0.33 per share, per our estimate, marginally ahead of the consensus of $0.32. See our analysis of Ford Earnings Preview for a closer look at some of the trends likely to drive Ford’s results.

Ford has indicated that its U.S. deliveries over Q3 have picked up by about 16% versus last year to about 464,700 units, as demand for its automobiles remained strong despite mounting concerns about the U.S. economy. Ford has also fared better than the broader U.S. auto market, which apparently shrank over the quarter although its performance was worse than GM which reported a 24% increase in deliveries versus last year. However, Ford’s profitability is likely to see headwinds in Q3, as the company indicated in late September that its third-quarter operating profit would range from $1.4 billion to $1.7 billion, almost 50% below consensus estimates. Supply chain issues have resulted in the shortage of parts for roughly 40,000 to 45,000 Ford vehicles, most of which are high-margin SUVs and trucks, which wouldn’t be able to reach dealers by the end of the quarter. That said, Ford expects these vehicles to be shipped over Q4, with its annual operating profit guidance remaining intact.

There remain multiple near-term challenges for the auto industry. With inflation numbers for September coming in higher than expected, the Federal Reserve is likely to continue with its aggressive interest rate hikes in the coming months. This could result in a downcycle for the U.S. economy, which typically results in some weakness in automotive sales. That being said, Ford’s sales were already quite depressed over 2020 and 2021 (U.S. sales of around 2 million vehicles over 2021 and 2022, compared to 2.8 million in 2019) due to the semiconductor shortage, so there may not be too much downside even in an economic downturn. We value Ford stock at about $19 per share, which is about 60% ahead of the current market price. See our analysis on Ford Valuation: Expensive Or Cheap for more details on what’s driving our price estimate for Ford.  For more information on Ford’s business model and revenue trends, check out our dashboard on  Ford Revenue: How Ford Makes Money.

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Returns Oct 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
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[1] Month-to-date and year-to-date as of 10/18/2022
[2] Cumulative total returns since the end of 2016

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