Ford Motor Company's shares faced a significant downturn early Thursday after the automaker announced its second-quarter earnings, which fell short of market expectations due to escalating warranty costs and operational expenses. The company remains cautious, continuing to forecast a full-year loss for its electric vehicle (EV) segment. For the three-month period ending June 30, the adjusted earnings per share (EPS) stood at $0.47, a decline from $0.72 in the same quarter the previous year.
Analysts on Capital IQ had projected a normalized EPS of $0.68, resulting in a staggering 13% drop in stock price during premarket trading. Adjusted earnings before interest and taxes (EBIT) decreased to $2.76 billion, down from $3.79 billion in the corresponding quarter last year, reflecting a significant rise in warranty reserves that impacted profitability.
The costs and expenses of the company rose to $45.93 billion compared to $42.49 billion in the prior year, primarily driven by increased material costs associated with new products alongside rising manufacturing expenses. Chief Financial Officer John Lawler addressed these challenges during an earnings call, stating, "We still have lots of work ahead of us to raise quality and reduce costs and complexity, but the team is committed and we're heading in the right direction." While revenue from Ford's operations, excluding its Ford Credit financial services division, grew to $44.81 billion from $42.43 billion last year, it narrowly missed the analysts' consensus expectation of $44.9 billion.
Overall revenue for the second quarter reached $47.81 billion, marking a 6% increase aided by an uptick of 23,000 units in wholesales. Revenue growth was notable in the Ford Pro and Ford Blue divisions, with increases of 9% and 7%, respectively. However, the EV segment experienced a substantial decline, with revenue plummeting 37% due to industry-wide pricing pressures and lower wholesale volumes. Despite these hurdles, Ford reaffirmed its guidance for adjusted EBIT, projecting figures between $10 billion and $12 billion for 2024 while raising its adjusted free cash flow outlook by $1 billion, now estimated between $7.5 billion and $8.5 billion.
The automaker also plans to maintain its capital expenditure targets for the year, aimed at the lower end of the $8 billion to $9 billion range. Lawler expressed a measured optimism, saying, "In general, we see supply and demand for vehicles in balance, and industry dynamics, including market equations for our four segments, are playing out similar to what we forecast at the beginning of the year." Regarding the EV division, Ford has retained its forecast for a loss between $5 billion to $5.5 billion for the year, citing expectations of continued pricing pressure alongside necessary investments in next-generation EVs.
Chief Executive James Farley emphasized a more disciplined approach concerning capital and expenses in the EV sector, declaring, "This means we will not launch vehicles at a loss that are not good for our business, knowing what we know now about the reality of the market equation." In a recent strategic move, Ford announced last week plans to bolster production of its F-Series Super Duty pickup trucks, aligning with a substantial $3 billion investment at its Oakville facility in Canada, which had initially been designated as a hub for EV production, highlighting a shift in focus to meet market demands effectively..