Ford earnings: What to anticipate from the carmaker after tentative settlement with UAW

Ford, General Motors Co.
GM,
+0.14%
and Stellantis NV
STLA,
-1.01%
every have had a number of factories and distribution facilities offline because of the strike. GM and Stellantis are anticipated to comply with with agreements of their very own.

Ford was the primary firm to face walkouts at a key manufacturing unit, as staff at Ford’s Kentucky pickup-truck plant walked out on Oct. 11.

GM earlier this week detailed a few of the impacts of the strike, specific via the tip of the present quarter, and traders will need Ford to do the identical. Crucially, they’re ready to see if Ford follows GM in withdrawing steering for the yr because of the strike, which at Ford lasted sooner or later greater than the 40-day strike at GM in 2019.

Third-quarter earnings might are available higher than anticipated because the affect of the strike was restricted to the second half of September, CFRA analyst Garrett Nelson mentioned.

See additionally: UAW strike strikes to GM’s key SUV plant

But equally to GM, “we think Ford is also likely to withdraw full-year guidance due to uncertainty” associated to the strike, he mentioned.

“The focus of the release will likely be on the UAW strike and how Ford’s longer-term strategy could change as a result, such as potentially moderating its EV growth plans,” Nelson mentioned.

Here’s what to anticipate.

Earnings: Analysts surveyed by FactSet anticipate Ford to report third-quarter adjusted earnings of 46 cents a share. That would examine with adjusted earnings of 30 cents a share within the third quarter of 2022.

Revenue: FactSet analysts are taking a look at income of $43.9 billion, which might examine with $39.4 billion within the year-ago quarter.

Stock motion: Ford shares have underperformed the broader fairness market, and are dropping about 1% thus far this yr, which contrasts with positive aspects of round 8% for the S&P 500 index
SPX.
The underperformance holds for the previous three months, with Ford shares down 16% to the index’s 8% drop within the interval.

What else to anticipate: Analysts at BofA Securities just lately calculated that the UAW strike will have an effect of about $120 million for Ford within the third quarter “before a more sizable hit” within the present quarter, since solely two weeks of the strike’s practically six weeks fell within the July-September interval.

Much extra consideration will likely be paid to Ford’s estimates for the fourth quarter and into 2024.

On Tuesday, GM estimated an affect on earnings earlier than curiosity and taxation of about $600 million for the present quarter as a consequence of misplaced manufacturing.

Moody’s Investors Service mentioned in a notice earlier this month {that a} new union contract will imply greater labor prices for the Big Three, calculating that for Ford labor prices might enhance by as a lot as $1.4 billion for Ford, assuming raises of about 20% for hourly wages.

The union mentioned that the present four-year deal grants a 25% enhance in base wages via April 2028. It will cumulatively increase the highest wage by greater than 30% to greater than $40 an hour, and beginning wages by 68% to over $28 an hour.

All this might chip away at Ford’s revenue into the following yr.

Analysts at Evercore ISI mentioned in a report this week they anticipate Ford’s per-share earnings for 2024 could also be trending between $1.50 and $1.70 as Ford’s Pro and Blue, the automaker’s segments specializing in fleet gross sales and companies and on inner combustion-engine automobiles, respectively, “may see pressure” as a consequence of incentives, elevated wages, and an “unclear” enchancment on the electric-vehicle facet of the enterprise.