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Ford Soundly Beats Earnings Estimates But Shares Decline Anyway, Why?

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40 comments on Ford Soundly Beats Earnings Estimates But Shares Decline Anyway, Why?

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Market Yawns on Great Earnings

It’s not the news or the earnings that matters but the market’s reaction to it. 

In this case, the market yawned at Ford’s big beat the street results of EBIT $3.4 billion, compared to consensus estimate of $2.4 billion.

The story is telling. 

Reuters report Ford’s profit rises on strong truck demand but EV outlook weighs

Ford Motor Co (F.N) on Tuesday posted robust first-quarter revenue and profit, thanks to strong demand for trucks and SUVs, but issued a measured full-year outlook tempered by continued losses in its electric-vehicle unit.

In a late briefing, Ford Chief Executive Officer Jim Farley said he hopes the company becomes “boringly predictable” at meeting investor expectations. Ford missed Wall Street estimates for the fourth quarter, leaving $2 billion on the table, Farley said earlier this year.

Farley also said Ford does not intend to pursue EV sales volume “at any cost” – after the automaker earlier in the day slashed Mustang Mach E prices for a second time this year.

Facing declining demand for its products in China, Ford will restructure its operations there to run on lower investment, and “double down” on its commercial vehicle business there, including EVs, Farley said. Ford’s joint venture with Chinese automaker JMC Corp  can become an export hub for lower-cost commercial electric and combustion vehicles, he added.

Losses Mount On EVs

Ford lost more than $60,000 per electric vehicle sold in the first quarter. Its combustion-vehicle business, Ford Blue, averaged pretax profit of $3,715 a vehicle, while the Ford Pro commercial business earned $4,053 per vehicle, based on the company’s financial data.

It’s hard to make money when you lose $60,000 per EV sale, unless you don’t sell many EVs.

Demand for the electric Ford F-150 Lightning pickup is “really, really strong,” Farley said. Ford is sticking with plans to boost Lightning production to a rate of 150,000 vehicles a year by the end of this year.

I’m not sure 150,000 is “really strong” given  Ford sold 726,004 F-Series trucks in 2021. But it would be a big leap from now so let’s concede the point.

Profit Coming?

In a briefing, Chief Financial Officer John Lawler said the company is on track for its Model e electric vehicles to be EBIT margin-positive by the end of 2024. Ford expects the unit to post an EBIT margin of 8% by the end of 2026, a target CEO Farley described as “totally realistic” given the company’s “aggressive” moves to take cost out of its next-generation EVs.

The market doesn’t seem to believe Ford’s CFO profit forecast and/or sales forecast and neither do I.

I am amused by this statement: “Farley also said Ford does not intend to pursue EV sales volume at any cost – after the automaker earlier in the day slashed Mustang Mach E prices for a second time this year.”

Ford is slashing prices, selling EV cars and trucks at big losses while maintaining it will not go after EV volume at any cost.

Ford Questions and Answers

  1. What precisely is Ford doing? 
  2. What do Ford customers want?
  3. Does it even matter what Ford’s customers want?

1A: Ford is pursuing EV volume at the expense of cost, despite denying that.

2A: No one knows for sure because much depends on future pricing points and miles per charge that we do not know now. 

3A: Perhaps not. Customers will have no choice other than an EV if Biden gets his way.

EVs are Coming

Like it or not, EVs are coming. And they are coming whether it makes any environmental or economic sense.

I don’t object to EVs. I do object to enormous subsidies and extreme fear mongering over climate change. 

But EVs will not save the world. They will not even make a tiny dent.

Inflation or Deflation?

In isolation, Biden’s push for EVs is very inflationary. But part of that assumes people will be willing to buy EVs. 

What if they don’t? 

Worst of Both Worlds, Stagflation Right Now, But What’s Ahead?

For discussion of the inflation and deflation forces in play, please see Worst of Both Worlds, Stagflation Right Now, But What’s Ahead?

This post originated at MishTalk.Com

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40 Comments
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Oldest Most Voted
jiminy
jiminy
3 years ago
Henry Ford was a great man who changed America. I read is autobiography the guy was ahead of his time and I’m sure he would be saddened by today’s financialization of the country. RIP Ford.
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Columbo
Columbo
3 years ago
This one’s a wait and see as far as the market reaction on the stock, the stocks basically flat lining.
It should be noted that Ford had an issue with the battery on the F-150 ev and had to halt production.
That’s been resolved.
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JackWebb
JackWebb
3 years ago
I invite anymore to run an Altman Z score on Ford. It doesn’t look good. I am knowledgeable on electric vehicles. I think Ford might not survive the transition. I am baffled by their focus on EV pickups. Look at the reviews on the F-150 Lightning. I have been quite skeptical, and the early results have underperformed my expectations, which were low to begin with. Looks like they’ve bungled it. I can say more, but this is a comment section with limited attention spans and dominated by generalities. I have quite specific issues, but they are detailed and this blog doesn’t lend itself to detail.
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Billy
Billy
3 years ago
I feel that the demonizing of nat gas and the big push for electric is all about government overreach. Just like their control over schools, medical industry, banks, and big tech. Electricity is far easier to control individuals than multiple forms of competing energy.
If climate change was real, then our government would be building 5+ Generation IV nuclear reactors and offering electricity for free.
As far as Ford, how are they seriously loosing $60k per EV? Tesla make more than $15,000 per vehicle. Maybe it doesn’t make sense unless you own the lithium mines, battery manufactures, and everything else in between.
I do have to say that Ford is the best as far as innovating new vehicles that everyone wants. The Bronco, Maverick, Mustang, Lightning, and several other European models all have long waiting lists. Ford’s F-Series is the number one selling pickup for 46 years now.
Seems to me that Ford is only selling EVs because the government is strong-arming them.
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KidHorn
KidHorn
3 years ago
Reply to  Billy
Tesla sells in much larger volume. That’s the main difference between Ford and Tesla. Ford is going to exit Europe. They just announced thousands of layoffs there. At least they won’t make cars there anymore. They may rebrand some VWs and try to sell them.
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PeterEV
PeterEV
3 years ago
Reply to  Billy
All you have to do is take a look at the shrinking glaciers and understand the science behind it to realize that the government is not overreaching but trying to curb the consequences of our emissions and as result try to conserve a natural resource.
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8dots
8dots
3 years ago
Ford produce cars in Turkey, Cologne, Spain, Mexico, China, Thailand…all over the world.
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KidHorn
KidHorn
3 years ago
Reply to  8dots
Their footprint is going to shrink. Particularly in China. China is going to enact their 6b emission standard July 1. Dooming many ICE vehicles there. And there’s no way Ford can compete with EVs in China.
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PeterEV
PeterEV
3 years ago
Mish wrote: “Customers will have no choice other than an EV if Biden gets his way.”
If has NOTHING to do with Biden. It has EVERYTHING to do with depletion of crude oil that powers our **world** transportation systems. If car companies can make profits on spark plugs, fan belts, oil changes, and even on ICE sales, WHY are they switching to EVs???
I’ve pointed out on a number of comments that according to Exxon Mobil (search on Exxon view to 2050) that the world may have peaked in crude oil production in 2019 but after 2032, Exxon is forecasting it’s all downhill with world crude oil production. World Natural Gas production is not that far behind (around 2050) and coal (2013) has already peaked.
Peaking of World Crude Oil Production (4th graph down and anything below the orange area is used to make transportation fuels):
Peaking of World Natural Gas Production (1st and last graph)
On Peak Coal:
We have to change!!! Biden sees it as a climate change issue but the climate change issue is masking the depletion of world fossil fuel (and other) reserves. I am sure that those in power are fully aware of this. They are just playing politics to appease their constituents and/or contributors and/or philosophical nature. Anyone who can read the Exxon graph knows this.
EV competition is rising and prices are falling. Researchers have created better more energy dense batteries in their labs with the potential for them to be cheaper. This bodes well for falling EV prices. It will also play a major part in the storing of electricity for night time and cloudy periods.
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KidHorn
KidHorn
3 years ago
Reply to  PeterEV
I think the big driver towards EV adoption is going to be cost and performance. Not government mandates, Even without mandates, EVs would eventually take over.
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JackWebb
JackWebb
3 years ago
Reply to  KidHorn
The focus on pickup trucks makes little sense to me, the segmentation of that market notwithstanding. But it’s a details question, and as I’ve said in a different comment, this is not a blog that focuses on detail.
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PeterEV
PeterEV
3 years ago
Reply to  JackWebb
I think they have the ability to bring electrical power to a remote job site without the need for a generator.
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PeterEV
PeterEV
3 years ago
Reply to  KidHorn
Given that cars are on the road for 12 years, mandates help in increasing EV numbers, show that there is support for EVs, and helps spur development of the needed infrastructure and motor/battery development. The year 2032 is less than 12 years away. I agree that we will be driving electrically eventually.
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Raymondo
Raymondo
3 years ago
How much of the loss per electric vehicle is depreciation of the huge investment in plant and equipment that they have just made operational, ie fixed costs, and how much is incremental to each vehicle?
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KidHorn
KidHorn
3 years ago
Reply to  Raymondo
Since they only sold about 10k EVs, I would guess it’s mostly fixed costs.
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8dots
8dots
3 years ago
In 2008, before Nov 20 election, I was fully committed to Ford, for political reasons : if Obama wins Detroit will not die. It was
against all logic. but it worked. I took few jabs, but I got F at about 2.00 average. I became invincible, but I fell on the bunny slope.
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8dots
8dots
3 years ago
GM and Ford were fully committed to EV, but now EV became an option. If other EV mfg cannibalize Ford & GM the gov will be
less committed to EV for Detroit. They will change their radical regulations and flip to ICE.
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KidHorn
KidHorn
3 years ago
Reply to  8dots
If Ford and GM stop making EVs, they’re dead. The only ICE things they might sell are pickups in the US. Not nearly enough volume to support them.
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TexasTim65
TexasTim65
3 years ago
Reply to  KidHorn
As I mentioned above, both companies have abandon the car market for SUV and trucks.
They *must* get an EV truck and SUV to market that consumers will buy if they want to remain in the EV market. Problem is, no one has gotten a truck or SUV to market (Note: a 100K SUV/Truck doesn’t count because only the top 5% can afford that)
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JackWebb
JackWebb
3 years ago
Reply to  TexasTim65
This blog has virtually no commentary about details, and when it comes to pickups it is all about the details.
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8dots
8dots
3 years ago
The EV innovators cannibalized themselves.
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HippyDippy
HippyDippy
3 years ago
When you consider all that has to happen to make an electric vehicle a reality, I don’t see how it is considered more environmentally friendly. Not to mention how the evolution of the battery has not progressed to the point where it is even possible to make it a dominant form of transportation. Also, on the weak nature of our power grid, it seems that utility companies are not onboard with making more electricity available. Strict regulations on who can sell electricity, how much they can sell, and generally the payouts for the average person is done in the form of credits. This even when it’s not needed by the homeowner. The whole thing is just a pile of garbage that only exists because people just blindly obey whatever deranged lunatic is in charge.
On the stock earnings, I’ve always noted that they drop the most after they beat the expectations. They rose up on those expectations and the instant they are realized the market starts looking towards the next quarter. In this case, I wouldn’t expect it to rise up again. If they keep issuing statements like the one he just did, they’ll be trading on par with Silicon Valley Bank shares. That made no sense at all if you are expecting the company to run with the intent of making a profit. Which makes one wonder just what their intent is? Not that it matters to me. I don’t own much and I’m still happy.
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KidHorn
KidHorn
3 years ago
Reply to  HippyDippy
Batteries are getting better every year. There’s a lot of R&D in battery technology. There are plans to put the best ones in aircraft. In a few years, there will be battery powered airplanes.
And the load on the grid isn’t that much. I can charge my tesla to 300 miles of range with the equivalent of running my dryer for 10 hours. I actually charge it off my dryer plug. And I charge it at night when electricity is cheaper and there’s less load on the grid.
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Thetenyear
Thetenyear
3 years ago
Just wait until that “really, really strong” Lightening pickup buyer realizes that their new truck is actually “really, really inefficient”. EV pickups are notorious for their horrible range, especially when under load and when towing. It would not surprise me if one spends more time at the charging station than on the highway.
You would expect ridiculously huge margins the way they are pimping EV’s. If you apply the $60k loss per vehicle to the 150,000 they plan to produce they will lose 9 billion dollars. I do not believe they are really losing 60k per vehicle. But, if they are losing even a fraction of that it makes you wonder why they want to push EV sales.
It will take huge bailouts of taxpayers(via purchase rebates) and Ford itself to get through this madness. On the bright side, if Ford survives they can become the government’s preferred supplier of zero emission army vehicles. Who would mess with the “Ford Fighting Vehicle” and our all electric army?
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RonJ
RonJ
3 years ago
Reply to  Thetenyear
“Who would mess with the “Ford Fighting Vehicle” and our all electric army?”
Maybe under future carbon consumption rules, those carbon emitting munitions will be banned.
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KidHorn
KidHorn
3 years ago
Reply to  Thetenyear
When you only sell 10k vehicles/year, you can easily lose $60k/vehicle.
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babelthuap
babelthuap
3 years ago
EVs are no fad but they will eventually hit a wall. Most of the planet doesn’t have a stable grid, a grid period or the coin to purchase an EV or the coin to repair them. Gasoline ain’t going nowhere for a long long time. Can anyone make an EV battery in their backyard? Not yet but people do make their own bio-diesel from used cooking oil in many countries. I know someone who does it in the US. It’s not hard if you have a source of used cooking oil and the right equipment.
As for Ford’s EV truck, I don’t think anyone believed it would be a winner out the gate but they had to go all in. The main thing that concerns me with EV trucks is they are nowhere near the functionality of a gas truck needed to do real truck stuff. Good for Elon putting around town in his Cyber truck but let’s give that thing a fulls day work of hauling heavy equipment, horses, cattle and do it in extreme heat and cold. And let’s see the impact financially when it breaks down.
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KidHorn
KidHorn
3 years ago
Reply to  babelthuap
EVs aren’t that expensive compared to other cars. The Model Y, the best selling car this year, costs less than the average vehicle price in the US. There are many EVs that cost under $40k. And the price is going to drop over the coming years.
The electric grid will be supplemented with solar. The cost of solar panels keeps going down. Won’t work for everyone, but in aggregate it will lighten the load on the grid.
The vast majority of pickup truck owners don’t haul heavy equipment, horses, or cattle. And even if they did, EVs can do that if needed. Maybe not for hundreds of miles on a single charge, at least not yet. The Cybertruck hasn’t been released yet, so I would hold off judging it until someone actually uses it.
The problem with the Ford F150 lightning is dealers are marking it up $25k. They can do this because it’s in high demand. Ford is angry about this and is trying to put a stop to it.
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RonJ
RonJ
3 years ago
With 15 minute cities, who will need cars? The future is the government programming our lives, in Klaus Schwab’s 4th industrial revolution.
Martin Armstrong: “New York is joining a larger network of C40 cities that were provided unlimited power to track their citizens under the premise of climate change.” “The plan is to track EVERY individual household’s food consumption and carbon footprint.” What is ones carbon footprint from simply buying an EV, considering the amount of fossil fuel to produce and transport one to the showroom?
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KidHorn
KidHorn
3 years ago
Reply to  RonJ
EVs are clearly not 100% environmentally friendly, but over their lifetime, they’re certainly better for the environment than a gas powered vehicle.
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KidHorn
KidHorn
3 years ago
Ford, GM, and Chrysler are screwed. They have tens of billions of dollars in debt, they can’t figure out how to make a profit on EVs, and their bread and butter, pickup trucks, are going to be crushed by the Cybertruck and cheap chinese EV pickups.
I think their only hope is to spin off their EV business and let the remaining gas division go bankrupt. An added benefit is their EV companies can ditch their dealer network since they won’t have contracts with them. They can do what Tesla does and sell directly to consumers. Not sure if this would be legal.
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Maximus_Minimus
Maximus_Minimus
3 years ago
Reply to  KidHorn
Check out Caixin report: China’s Car Exports Jump Nearly 60% in First Quarter on NEV Shipments.
Maybe we will have affordable and reliable EVs some day as the above three go for the expensive end.
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TexasTim65
TexasTim65
3 years ago
Reply to  KidHorn
They can’t sell directly to consumers and even if they could it wouldn’t really help them.
Their problem isn’t EV’s per say. Its that they both have abandoned the car market entirely for SUV’s and trucks. So yeah, they can’t sell EV cars because they can’t sell ICE cars either. The only way they are going to make EV’s work is if they can get an EV truck or EV SUV that consumers will buy. If they can’t they are toast and that means another tax payer bailout so we better hope that doesn’t happen.
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KidHorn
KidHorn
3 years ago
Reply to  TexasTim65
You keep saying they can’t sell directly to customers, but somehow Tesla does it.
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GruesomeHarvest
GruesomeHarvest
3 years ago
The whole green energy thing is a ruse. Plants love CO2! Ford should follow Toyota’s lead and pursue hybrids vs electric vehicles.
On a side note, dedollarization continues. Biden’s stupid war in Ukraine and it’s weaponization of Swift, the illegal seizure of Russian assets and the strong arming of countries to boycott Russia are all backfiring. Also it’s illegal destruction of Nordstream, a vital infrastructure for Germany, shows what being an ally of Biden’s America gets you.
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KidHorn
KidHorn
3 years ago
Reply to  GruesomeHarvest
Higher CO2 levels and warmer temperatures are making the earth greener. Satellite data shows this. It allows us to grow more crops. The greenies need to be careful what they with for. Is it worth it to reduce crop production to prevent oceans from rising an inch?
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Zardoz
Zardoz
3 years ago
Reply to  GruesomeHarvest

Toot toot! Kook alert!

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RonJ
RonJ
3 years ago
Reply to  Zardoz
Thanks for letting us know you are here.
Musk said that most of the conspiracy theories bout Twitter turned out to be true.
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billybobjr
billybobjr
3 years ago
Reply to  Zardoz
Toot toot! Kook alert! You must have been looking in a mirror !!
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KidHorn
KidHorn
3 years ago
Reply to  Zardoz
Coming from the guy who gets his news from MSNBC. The kooky Trump conspiracy factory where Trump always ends up acquitted of all allegations.
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