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

Ford Motor Co. shares dropped more than 4% in the extended session Monday after the company said inflation and parts shortages will leave it with more unfinished vehicles than it had expected, reminding Wall Street supply-chain snags are far from over for auto makers.

Ford F,
+1.43%
said it expects to have between 40,000 and 45,000 vehicles in inventory at the end of the third quarter “lacking certain parts presently in short supply.”

The auto maker also said that based on its recent negotiations, payments to suppliers will run about $1 billion higher than expected for the quarter, thanks to inflation. The company reaffirmed its outlook for the year, however.

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 started to believe “these problems were in the rearview mirror with inventors 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. That will cause some shipments and revenue to shift to the fourth quarter.

“Ironically, Ford may have become a victim of its own success in that its recent US sales growth has outperformed peers by a wide margin,” Nelson said. Its third-quarter production “apparently wasn’t able to keep pace with demand.”

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

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

Shares of Ford ended the regular trading day up 1.4%. The company has embarked on a reorganization to pivot to electric vehicles, and last month confirmed layoffs in connection with its new structure.

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

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

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

Shares of Ford slid 4.4% after hours, and have lost 28% so far this year, compared with losses of 18% for the S&P 500 index SPX,
+0.69%.

The news comes a week after FedEx Corp. FDX,
+1.17%
roiled markets and raised fears of an economic slowdown by withdrawing its outlook for the year and warning that the year was likely to become worse for the business.

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