Ford shares fall more than 4% as supply costs rise by  billion, parts shortages leave more cars unfinished

Ford shares fall more than 4% as supply costs rise by $1 billion, parts shortages leave more cars unfinished

Shares of Ford Motor Co. fell more than 4 percent in Monday’s extended session after the company said inflation and parts shortages will leave it with more unfinished vehicles than it expected, a reminder that Wall Street’s supply chain hurdles are not over for car manufacturers.

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 higher than expected for the quarter, thanks to inflation. However, the company confirmed its outlook 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 were starting to think that “those problems were in the rearview mirror with stocks starting to recover from the record lows of the last year or so,” Nelson said.

The unfinished vehicles include high-demand, high-margin models of popular trucks and SUVs, Ford said. This will result in some shipments and revenue shifting to the fourth quarter.

“Ironically, Ford may have become a victim of its own success, as its recent U.S. sales growth far outpaced its peers,” Nelson said. Third-quarter production was “apparently unable to keep up with demand.”

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

Ford called for third-quarter adjusted EBIT of between $1.4 billion and $1.7 billion.

Ford shares closed the regular trading day up 1.4%. The company has begun a reorganization to shift to electric vehicles and last month confirmed layoffs related to its new structure.

Ford is set 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, matching third-quarter 2021 adjusted EPS on revenue of $38.8 billion.

Quarterly sales will compare with revenue of $35.7 billion in the prior 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,
roiled markets and fueled fears of an economic slowdown by withdrawing its outlook for the year and warning that the year was likely to get worse for business.

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