Ford stock drops more than 4% as supply costs to jump by $1 billion, parts shortages to leave more cars unfinished

The shares of Ford Motor Co. fell more than 4% in the extended session on Monday after the company said inflation and parts shortages will leave it with more unfinished vehicles than expected, recalling that supply chain problems of Wall Street are far from over for automakers.

Ford F,
said it expects to have 40,000 to 45,000 vehicles in inventory at the end of the third quarter “that do not have certain parts currently in short supply.”

The automaker also said that based on its recent negotiations, payments to suppliers will be about $1 billion more than expected for the quarter, thanks to inflation. The company, however, reaffirmed its forecasts for the year.

Ford’s warning “is evidence that auto parts shortages and supply chain issues are still ongoing,” CFRA analyst Garrett Nelson told MarketWatch.

Many investors had begun to believe that “those problems were in the rearview mirror with stocks starting to recover from the record lows of the past year,” Nelson said.

Unfinished vehicles include high-demand models and margins of popular trucks and SUVs, Ford said. This will cause some shipments and revenue to move into the fourth quarter.

“Ironically, Ford may have become a victim of its own success, as its recent U.S. sales growth has outpaced its peers by a wide margin,” Nelson said. Its third-quarter production “apparently could not keep up with demand.”

Ford reiterated expectations for full-year 2022 adjusted earnings before interest and taxes of $11.5 billion to $12.5 billion, despite shortages and higher payments to suppliers, it said.

Ford asked for adjusted EBIT for the third quarter of between $1.4 billion and $1.7 billion.

Ford shares closed the regular session up 1.4%. The company has embarked on a reorganization to pivot to electric vehicles and last month confirmed layoffs related to its new structure.

Ford plans to report third-quarter financial results on Oct. 26, when it said it expects to “provide more dimension on full-year performance expectations.”

Analysts polled by FactSet expect the automaker to report adjusted earnings of 51 cents per share, which would match third-quarter 2021 adjusted EPS on revenue of $38.8 billion.

Quarterly sales would compare with $35.7 billion in revenue in the year-ago period.

Ford shares fell 4.4% after hours and have lost 28% so far this year, compared with losses of 18% for the S&P 500 SPX.

The news comes a week after FedEx Corp. FDX,
rattled markets and raised fears of an economic slowdown by withdrawing its outlook for the year and warning that business was likely to worsen next year.

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