Ford’s upcoming earnings report not only has the potential to impact the stock market but also offers valuable insights into the overall outlook of the car industry amid conflicting signals. While U.S. new car sales saw a growth of over 10% in 2023, the same cannot be said for electric vehicle sales. Moreover, rising labor costs coupled with slipping new-car prices and higher interest rates affecting buyers’ monthly payments further add to the complex scenario.
Scheduled for release after the market close on Tuesday, Ford’s fourth-quarter numbers are highly anticipated. According to FactSet, Wall Street analysts expect earnings per share of 12 cents from sales amounting to $43.1 billion. In comparison, last year Ford reported earnings per share of 51 cents from sales of $44 billion.
However, it’s important to note that the United Auto Workers’ strike played a significant role, beginning in mid-September and ending only in mid-November. As a result, this widely recognized one-time factor makes the current numbers less influential in comparison to what Ford has to say about its projections for 2024.
Drawing inspiration from General Motors’ results would shed light on how this approach can work successfully. When General Motors announced its expectation of a 2024 operating profit of approximately $13 billion (compared to $12.4 billion in 2023), the stock soared by 9.4%. The initial Wall Street estimates were closer to $11 billion. In 2023, GM earned $12.4 billion.
Analysts foresee Ford projecting a 2024 operating profit of about $9.6 billion, with estimates remaining relatively unchanged since GM reported its results.
For the fourth quarter and full year of 2023, Ford is expected to report operating profits of $900 million and $10.4 billion respectively. Notably, the $900 million profit is a drop from the $2.2 billion reported in the third quarter, and Ford estimates that the UAW strike had cost them approximately $1.7 billion.
In summary, Ford’s forthcoming earnings report holds significant implications for both the company’s performance and the broader car industry outlook. Stay tuned for the latest updates.
Ford Set to Beat Expectations with Strong Guidance
Analyst Mike Ward from Freedom Capital Markets anticipates that Ford will surpass the Street’s expectations, projecting guidance closer to $12.8 billion, compared to the estimated $9.6 billion. This positive outlook is supported by the company’s scaled-back investment in electric vehicles, which is expected to improve earnings for 2024. In the first nine months of the year, Ford’s EV division, known as Model e, incurred losses of $3.1 billion.
While Ward rates Ford shares as a Buy with a target price of $20, his peers are less optimistic. The average analyst price target for Ford stock hovers around $12.50, a significant contrast to Monday’s closing price of $11.59. Only 37% of analysts covering Ford stock recommend buying shares, while the average Buy-rating ratio for stocks in the S&P 500 stands at about 55%.
Ahead of the earnings announcement, options markets suggest that Ford stock may experience a 6% fluctuation in either direction. Historically, following the previous four quarterly reports, shares have dropped by an average of approximately 5% after each release.
Over the past year, Ford stock has experienced an 8% decline, whereas the S&P 500 and Nasdaq Composite have seen increases of approximately 20% and 30%, respectively.
Factors such as rising interest rates, increasing labor costs, and a slowdown in demand growth for electric vehicles have negatively impacted investor sentiment. However, despite these challenges and losses in the Model e division, Ford had an exceptional year in 2023.
Ford will hold a conference call at 5 p.m. Eastern time to discuss the results.
