Earnings Outlook: Ford earnings: What to expect from the carmaker after tentative agreement with UAW

Ford, General Motors Co. GM, -1.07% and Stellantis NV STLA, -1.65% each have had several factories and distribution centers offline due to the strike. GM and Stellantis are expected to follow with agreements of their own.

Ford was the first company to face walkouts at a key factory, as workers at Ford’s Kentucky pickup-truck plant walked out on Oct. 11.

GM earlier this week detailed some of the impacts of the strike, particular through the end of the current quarter, and investors will want Ford to do the same. Crucially, they are waiting to see if Ford follows GM in withdrawing guidance for the year due to the strike, which at Ford lasted one day more than the 40-day strike at GM in 2019.

Third-quarter earnings could come in better than expected since the impact of the strike was limited to the second half of September, CFRA analyst Garrett Nelson said.

See also: UAW strike moves to GM’s key SUV plant

But similarly to GM, “we think Ford is also likely to withdraw full-year guidance due to uncertainty” related to the strike, he said.

“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 said.

Here’s what to expect.

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

Revenue: FactSet analysts are looking at revenue of $43.9 billion, which would compare with $39.4 billion in the year-ago quarter.

Stock movement: Ford shares have underperformed the broader equity market, and are losing about 1% so far this year, which contrasts with gains of around 8% for the S&P 500 index SPX. The underperformance holds for the past three months, with Ford shares down 16% to the index’s 8% drop in the period.

What else to expect: Analysts at BofA Securities recently calculated that the UAW strike will have an impact of about $120 million for Ford in the third quarter “before a more sizable hit” in the current quarter, since only two weeks of the strike’s nearly six weeks fell in the July-September period.

Much more attention will be paid to Ford’s estimates for the fourth quarter and into 2024.

On Tuesday, GM estimated an impact on earnings before interest and taxation of about $600 million for the current quarter due to lost production.

Moody’s Investors Service said in a note earlier this month that a new union contract will mean higher labor costs for the Big Three, calculating that for Ford labor costs could increase by as much as $1.4 billion for Ford, assuming raises of about 20% for hourly wages.

The union said that the current four-year deal grants a 25% increase in base wages through April 2028. It will cumulatively raise the top wage by more than 30% to more than $40 an hour, and starting wages by 68% to over $28 an hour.

All this could chip away at Ford’s profit into the next year.

Analysts at Evercore ISI said in a report this week they expect Ford’s per-share earnings for 2024 may be trending between $1.50 and $1.70 as Ford’s Pro and Blue, the automaker’s segments focusing on fleet sales and services and on internal combustion-engine vehicles, respectively, “may see pressure” due to incentives, increased wages, and an “unclear” improvement on the electric-vehicle side of the business.