Ford earnings: Stock drops sharply after missing Q4 EPS estimates

Yahoo Finance's Pras Subramanian breaks down Ford earnings.

Video transcript

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DAVE BRIGGS: All right, Ford also out with earnings. Pras Subramanian has them for me. It was a huge report for GM earlier this week. Does Ford follow suit, my friend?

PRAS SUBRAMANIAN: Well, you know, you can see the shares there trading pretty low-- pretty-- lower here after hours. Mixed results with a revenue beat, but an EPS kind of miss. So revenue $44 billion here versus 39 billion estimated. Adjusted EPS was a miss-- $0.51 versus $0.62 estimated. Adjusted EBIT, 2.6 billion for the fourth quarter, versus 3.45 billion estimated from the Street. Also guidance, for the full year looking at 9 billion to 11 billion versus 10 billion estimated. So that's kind of bracketing that estimate there.

Ford said its operating results were below expectations, though the company is optimistic about 2023. Ford CEO Jim Farley said in a statement, we should have done better last year. He said, we left about 2 billion in profits on the table that were within our control, and we're going to correct that with improved execution and performance. Like I said, the guidance for 2023 was in that sort of range, so that's actually a good point. What to watch on the call here? The demand story, macro headwinds.

I heard about customers last quarter going down, seeking lower trims for cars that they wanted to buy. In the release, they mentioned that headwinds could include a mild recession in the US and a moderate recession in Europe. Also, want to look for pricing pressures. We saw the Mustang Mach-E have about a 10% price cut just this week. We're going to see if they're going to actually potentially follow through with any more of those if they see customers balking at higher prices. So we'll keep an eye on that, and we'll look out for these things on the call. Back to you, Brad-- Dave.

SEANA SMITH: Yeah, Pras, let me just jump in here real quick, because when we talk about some of that demand story, some of that pricing story, when it comes to the supply chain issues, we know that has long been an issue here for a number of the automakers. Anything in this release that's showing that the fact that Ford is still struggling with that, or is that simply an issue of the past?

PRAS SUBRAMANIAN: You know, last quarter they mentioned how they had about several thousand trucks waiting for chips to be installed to be sent out. It does not appear that they have that issue this quarter. I have to dig a bit more closely into the release, but I did not see it on first blush. Hopefully, we'll hear more about that on the call as well, but it seems they are having a better time, or are able to actually make more trucks this quarter than in the past.

BRAD SMITH: Pras, this is still going to come down to the battery. Anything on the battery announcement front that we heard from Ford either in this release or we expect to hear from them on the call? Because if you kind of point back to any of the earnings calls within the legacy automotive manufacturers or even in the new kid on the block that is kind of riling everybody up, Tesla, it's all about the battery.

PRAS SUBRAMANIAN: Yeah, we haven't heard anything here about anything-- a miss here in terms of production for Ford in 2023 and 2024. They're still on track. They're building these new factories in Kentucky to build these batteries. So I haven't heard anything about that. But recall that in GM's release this week, they talk about investing in the Lithium Americas mine. So they're talking about proactively acquiring that material for their batteries. We're not seeing Ford say that just quite yet, but it sounds like they're on pace to hit their targets for EV production this year and the year after that.

SEANA SMITH: All right, Pras, thanks so much. We're looking at shares off just about 6% in extended trading.