Ford Motor Co. is set to update investors today on its third-quarter profit and revenue, providing insights into the ongoing autoworkers strike and its potential impact on Ford’s year-end performance.
Current State of the Autoworkers Strike
Currently, Ford, General Motors Co., and Stellantis NV have experienced the shutdown of several factories and distribution centers due to the ongoing strike. Ford faced the first walkout at its Kentucky pickup-truck plant on Oct. 11, sparking concerns within the industry.
The Need for Transparency
Investors are eagerly waiting to see if Ford, following GM’s lead, will withdraw guidance for the rest of the year. GM has already detailed some of the strike’s impacts, particularly during this quarter. It is crucial for Ford to communicate similar information.
Potential Impact on Third-Quarter Earnings
While the strike only affected the second half of September, it is anticipated that Ford’s third-quarter earnings could surpass expectations. CFRA analyst Garrett Nelson believes this limited impact could result in better-than-expected earnings for Ford.
Shift in Ford’s Strategy
The release from Ford will likely highlight the effects of the UAW strike and how they could potentially lead to changes in Ford’s long-term strategy, such as moderating its electric vehicle (EV) growth plans.
Expectations for Third-Quarter Performance
Earnings: According to analysts surveyed by FactSet, Ford is expected to report third-quarter adjusted earnings of 46 cents a share. This compares to adjusted earnings of 30 cents a share in the third quarter of 2022.
Revenue: FactSet analysts predict revenue of $43.9 billion for the quarter, compared to $39.4 billion during the same period last year.
Stock Movement
Ford shares have been underperforming the broader equity market this year, currently facing a decline of about 3%. In contrast, the S&P 500 index has experienced gains of around 10%. This underperformance has been more pronounced in the past three months, with Ford shares decreasing by 17% compared to the index’s 8% drop within the same period.
Potential Impact of the UAW Strike
Analysts at BofA Securities have recently estimated that the UAW strike will impact Ford by approximately $120 million in the third quarter, with a more substantial impact expected in the current quarter. The strike lasted for nearly six weeks, but only two of those weeks fell within the July-September period.
Future Considerations
Investors and analysts will be closely monitoring Ford’s estimates for the fourth quarter and beyond to gain insights into the company’s performance.
General Motors (GM) estimated an impact on earnings before interest and taxation of about $600 million for the current quarter due to lost production.
Moody’s Investors Service warned in a recent note that the new union contract will result in higher labor costs for the “Big Three” automakers, including Ford. The note calculated that labor costs could potentially increase by as much as $1.4 billion for Ford, assuming a raise of about 20% for hourly wages.
Potential Profit Challenges
The aforementioned factors could potentially erode Ford’s profit in the coming year. Analysts at Evercore ISI stated in a recent report that they anticipate Ford’s per-share earnings for 2024 to be between $1.50 and $1.70. They noted that Ford’s Pro and Blue segments, which focus on fleet sales and services and internal combustion-engine vehicles respectively, may face pressure due to incentives, increased wages, and uncertainties surrounding improvements in the electric-vehicle side of the business.