Ford stock on pace for worst day in more than 11 years after cost warning

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Ford F-150 Lightning at the 2022 New York Auto Show.
Scott Mlyn | CNBC

DETROIT – Ford Motor’s stock is on pace for its worst day in more than 11 years, after the automaker pre-released part of its third-quarter earnings report and warned investors of $1 billion in unexpected supplier costs.

Shares of Ford were trading at about $13.10 apiece Tuesday afternoon, down by more than 12%. If the losses hold into the close, it would knock roughly $7 billion off the company’s market value.

It would also be the stock’s worst day on a percentage basis since Jan. 28, 2011, when the automaker’s fourth-quarter earnings disappointed investors and the stock shed 13.4% to close at $16.27 a share, according to data compiled by FactSet.

Ford, after the markets closed Monday, said supply problems have resulted in parts shortages affecting roughly 40,000 to 45,000 vehicles, primarily high-margin trucks and SUVs that haven’t been able to reach dealers.

Despite the problems and extra cost, Ford affirmed its guidance for the year but set expectations for third-quarter adjusted earnings before interest and taxes to be in the range of $1.4 billion to $1.7 billion. That would be significantly below the forecasts of some analysts, who were projecting quarterly profit closer to $3 billion.

Ford cited recent negotiations resulting in inflation-related supplier costs that will run about $1 billion higher than originally expected.

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While no major Wall Street analysts downgraded the stock in light of the update, several were caught off guard by Ford’s announcement. Expectations were that supply chain problems were easing. What’s more, Ford had recently been avoiding such problems better than some of its competitors.

Goldman Sachs analyst Mark Delaney said his firm was “surprised by the 3Q pre-announcement given the progress that Ford had previously made on supply chain bottlenecks.”

BofA Securities analyst John Murphy echoed those feelings in a note to investors Tuesday: “Ultimately, this news is somewhat surprising as broader macro news suggest supply chains have gotten incrementally better over the last few months.”

Several analysts questioned whether this was a Ford-specific problem, or a red flag for additional problems for the automotive industry.

In July, GM warned investors that supply chain issues would materially affect its second-quarter earnings, while similarly maintaining its guidance for 2022. The automaker said it had about 95,000 vehicles in its inventory that were manufactured without certain components that were expected to be completed during the second half of the year.

Ford said its unfinished vehicles are expected to be completed and sent to dealers in the fourth quarter.

The company’s stock is down more than 35% year to date but still up about 2% in the last 12 months.

— CNBC’s Christopher Hayes and Michael Bloom contributed to this report.

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