Ford (F) Q3 2022 Earnings Results

Ford (F) has released its third quarter 2022 earnings report after the stock market closed today. The automaker has struggled with supply chain bottlenecks throughout the year and warned investors about a hit last month.

According to the automaker’s release, Ford beat sales in the third quarter of 2022 as its electric vehicles continue to gain momentum. In addition, the company says it will transfer its self-driving technology interests internally after a significant loss on its Argo AI investment.

Ford Q3 2022 Profit Preview

Earlier today, we released a preview of Ford’s third-quarter results, including what to expect from Wall St analysts.

Ford forecast third-quarter operating profit of between $1.4 billion and $1.7 billion, despite Wall St expectations of about $1.8 billion.

According to estimates, Ford is expected to record increasing sales from last year, between $36 billion and $37 billion. As mentioned in the previous post, a few things to watch out for are comments about Ford’s stake in Rivian (nearly 10%), full-year guidelines and targets for electric vehicles.

So far, Ford has stuck to its 2022 guidelines, despite a projected $1 billion increase in additional supply chain costs.

Ford Q3 2022 Financial Results and Analysis

Just after the market close, Ford reported that it had beaten Wall St’s revenue expectations, despite ongoing supply chain problems.

Ford’s sales were $39.4 billion, up 10% from last year. Operating profit of $1.8 million was in line with Wall St. forecasts and above Ford’s recent expectations.

Meanwhile, Ford delivered strong operating cash flow of $3.8 billion in the third quarter. The adjusted free cash flow of $3.6 billion pushes the automaker’s FY guidelines to between $9.5 billion and $10 billion.

The automaker believes the company delivered a solid year-end close to the third quarter and expects operating profit of about $11.5 billion in 2022, up about 15% from previous forecasts.

Achieving this, Ford says, will require about 10% YOY growth in wholesale shipments.

Despite this, Ford posted a net loss of $827 million as a result of a $2.7 billion loss on its Argo AI investment (more on this below).

Ford’s third quarter 2022 earnings results were impacted by two things, according to the automaker:

Supply shortages resulting in approximately 40,000 vehicles waiting in stock for parts A higher-than-expected supplier payment of approximately $1 billion

The company ended the quarter with $32 billion in cash and $49 billion in liquidity.

Ford’s Q3 Electric Car Progress

Ford says it is on the cusp of an evolution in electric vehicles and orders continue to grow significantly with unprecedented demand for EVs.

Ford remained the #2 EV brand in the United States through Q3 2022, behind only Tesla. The automaker says it is still on track to hit its 600,000 EV run rate by the end of 2023 and 2 million by 2026. In the third quarter, Ford also introduced new US dealer requirements for dealers to encourage the adoption of electric vehicles. Ford has pioneered work at its BlueOval City in Tennessee, a focal point in Ford’s EV plans expected to open in 2025. The company will add shifts to increase production capacity of the Mustang Mach-E while scaling up E-Transit production. In Europe, where Ford has led the commercial segment for seven years, Ford unveiled the E-Transit custom. To meet these targets, Ford continues to secure raw materials and battery capacity. Ford’s investment in Rivian remained below $1 billion in the third quarter.

Ford expects climate initiatives in the United States to boost demand while offsetting its investments to accelerate EV production capability. The automaker says it believes it will meet the requirements for certain Mach-E and F-150 lighting models to receive the federal EV tax credit.

Ford-Q3-2022-profit-results-1Ford electric vehicle offeringSource: Ford Ford internally shifts plans for self-driving vehicles

During the third quarter, Ford decided to shift its spending on L4 advanced driver assistance systems developed by Argo AI to in-house development of L2/L3 technology.

Due to Argo’s failure to attract investors, Ford has recorded a significant loss ($2.7 billion pre-tax) on its investment in the company. When Ford first invested in Argo, it planned to introduce L4 technology by 2021. But as Ford’s CEO, Jim Farley, puts it:

But things have changed, and there is now a huge opportunity for Ford to give time – the most valuable asset in modern life – back to millions of customers while in their vehicle.

Before adding:

It is critical for Ford to develop great and differentiated L2+ and L3 applications that at the same time make transportation even safer.

The Ford chief also said they would hire talented engineers from Argo if the company resolves to accelerate internal development. The company says the decision comes as it sees growing interest and margins in other segments, such as Ford Pro and electric vehicles. While the company has no capital constraint, it will use the investments to drive strategic growth in these areas.

Other Observations from Ford’s Third Quarter Results Ford’s automotive market share grew to 12.8% (+1.7% YOY) in North America and 6.6% (+0.4% YOY) in Europe. In China, Ford’s market share declined 0.5% year-over-year to 2%. The company also recorded a quarterly loss from investments in electric vehicles in the region. Ford Pro, the automaker’s portfolio of business services and products, continues to gain momentum, with the company’s electric van, the E-Transit, which has a solid lead in large commercial trucks and vans in the United States (90%) and Europe. Starting next year, Ford will report across three business segments, including Ford Model e (for electric vehicles), Ford Pro (its business products and services), and Ford Blue (ICE vehicles), as the company gears up to accelerate sales of EVs .

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