Ford Motor (F) Stumbles With More Supply Chain Woes, Weak Q3 Guidance
1:58 pm Tuesday, September 20th, 2022
Ford Motor (F) is under pressure today after disappointing investors with its Q3 guidance. After reporting a huge EPS beat with nice revenue upside in Q2, Ford’s supply chain issues have tripped up Q3 results. Ford expects Q3 adjusted EBIT of $1.4-1.7 bln, which is below analyst expectations. The slight good news is that Ford reaffirmed full year adjusted EBIT of $11.5-12.5 bln.
So, what happened? It turns out that Ford expects to have about 40-45K vehicles in inventory at the end of Q3 that are lacking certain parts which are presently in short supply. Ford did not specify that these were chips and typically chips are described more as components, not parts. As such, we think the shortage is something else.
What makes the problem worse is that those 40-45K vehicles are primarily high-margin trucks and SUVs. The good news is that Ford expects these vehicles will be completed and sold to dealers in Q4. We suspect that is why Ford is maintaining its full year EBIT guidance. Basically, we think Ford sees it as more of a timing issue and not a demand issue.
Overall, this was not great guidance for Ford. Some may argue that Ford’s reaffirmation of full year guidance makes this is a non-issue. However, Briefing.com thinks there is a real possibility that Ford will lower full year guidance when it formally reports Q3 results in late October. It is tough to absorb $1 bln of costs and not have that impact guidance. Also, we suspect Ford will see inflated costs again in Q4. We hope we are wrong though.
The other part of this is that earlier in the year, it was all about chip shortages and how that should clear up by 2H22. Maybe that has happened, but we will have to wait for the call in October. But now the shortages seem more related to “parts” which sounds more broadly based, which makes us nervous. The stock is taking a pretty big hit on this news. We think investors share our concerns. Finally, we had hopes that vehicle production would get back to normal in 2H22 once the chip shortage abated, but it sounds like the supply chain issues will linger.
