Ford (F) beats third-quarter 2022 revenue expectations on EV surge, absorbing Argo engineers to boost self-driving tech

Ford (F) beats third-quarter 2022 revenue expectations on EV surge, absorbing Argo engineers to boost self-driving tech

Ford (F) released its third quarter 2022 earnings report after the close of trading today. The automaker has battled supply chain bottlenecks all year, warning investors of a negative impact on its results last month.

According to the automaker’s statement, Ford beat third-quarter 2022 revenue as its electric vehicles continue to gain momentum. Additionally, the company said it would transfer its standalone technology interests in-house after a significant loss on its Argo AI investment.

Preview of Ford’s results for the third quarter of 2022

Earlier today, we released a preview of Ford’s third-quarter earnings, including what you can expect from analysts on Wall St.

Ford was forecasting third-quarter operating profit of between $1.4 billion and $1.7 billion, despite Wall St’s expectation of about $1.8 billion.

Ford is expected to post revenue up from last year, between $36 billion and $37 billion. As mentioned in the previous post, a few things to watch are comments on Ford’s stake in Rivian (nearly 10%), full year guidance and EV targets.

So far, Ford has stuck to its 2022 guidance despite an expected $1 billion impact on incremental supply chain costs.

2022 Ford Q3 financial results and analysis

Just after the market closed, Ford said it beat Wall St revenue expectations despite ongoing supply chain issues.

Ford revenue was $39.4 billion, up 10% from a year ago. Operating profit of $1.8 million was in line with Wall St. guidance and above Ford’s recent guidance.

Meanwhile, Ford achieved strong operating cash flow of $3.8 billion in the third quarter. Adjusted free cash flow of $3.6 billion pushes the automaker’s forecast for the fiscal year to between $9.5 billion and $10 billion.

The automaker believes that the third quarter gave the company a strong end to the year and forecasts operating profit of about $11.5 billion for 2022, up about 15% from forecasts. previous.

Getting there, Ford says, will require about 10% annual growth in wholesale shipments.

Despite this, Ford reported a net loss of $827 million due to a $2.7 billion loss on its Argo AI investment (more details below).

Ford’s third-quarter 2022 results were impacted by two things, according to the automaker:

  1. Supply shortages resulting in approximately 40,000 vehicles in inventory awaiting parts
  2. A higher than expected supplier payment of approximately $1 billion

The company ended the quarter with $32 billion in cash and $49 billion in cash.

Advances in Ford’s Q3 electric vehicle

Ford says it is on the cusp of an electric vehicle evolution and orders continue to grow significantly with unprecedented demand for electric vehicles.

  • Ford remained the second-largest electric vehicle brand in the United States through the third quarter of 2022, behind only Tesla. The automaker says it is still on track to reach its operating rate of 600,000 EVs by the end of 2023 and 2 million by 2026.
  • In the third quarter, Ford also set out new U.S. dealer requirements to spur the rollout of electric vehicles.
  • Ford has paved the way for its BlueOval City in Tennessee, a focal point of Ford’s plans for electric vehicles, slated to open in 2025.
  • The company will add shifts to increase Mustang Mach-E production capacity while continuing to scale E-Transit production.
  • In Europe, where Ford dominated the commercial segment for seven years, Ford unveiled the custom E-Transit.
  • To achieve these goals, Ford continues to secure raw materials and battery capacity.
  • Ford’s investment in Rivian remained below $1 billion in the third quarter.

Ford expects U.S. climate initiatives to boost demand while offsetting its investments to ramp up electric vehicle production capacity. The automaker says it thinks it will meet the requirements for certain Mach-E and F-150 lighting models to receive the federal electric vehicle tax credit.

Ford-T3-2022-results-benefits-1
Ford Electric Vehicle Range Source: Ford

Ford is changing its self-driving technology plans internally

During the third quarter, Ford decided to shift its spending on advanced L4 driver assistance systems developed by Argo AI to focus on internal development of L2/L3 technology.

As Argo failed to attract investors, Ford incurred a substantial loss ($2.7 billion pre-tax) on its investment in the company. When Ford first invested in Argo, it planned to introduce L4 technology by 2021. However, as Ford CEO Jim Farley states:

But things have changed, and there is currently a huge opportunity for Ford to donate time – the
most valuable commodity in modern life – returning to millions of customers while they are in their
Vehicles.

Before adding:

It is essential for Ford to develop efficient and differentiated L2+ and L3 applications which, at the same time, make transport even safer.

The Ford chief also mentioned that they would hire talented engineers from Argo as the company disbands to speed up internal development. The company says the move comes as it sees increased interest and margins in other segments, such as Ford Pro and electric vehicles. Although the company has no capital constraints, it will use the investments to drive strategic growth in these areas.

Other observations from Ford’s third quarter results

  • Ford’s automotive market share increased in North America to 12.8% (+1.7% year-on-year) and in Europe to 6.6% (up 0.4% year-on-year).
  • In China, Ford’s market share fell from 0.5% year-on-year to 2%. The company also noted a quarterly loss due to investments in electric vehicles in the region.
  • Ford Pro, the automaker’s portfolio of commercial services and products, continues to gain momentum, with the company’s electric commercial van, the E-Transit, holding a solid lead over full-size commercial trucks and vans in the States. United (90%) and Europe.
  • Starting next year, Ford will report in three business segments, including Ford Model e (for electric vehicles), Ford Pro (its commercial products and services) and Ford Blue (ICE vehicles) as the company expands. prepares to accelerate sales of electric vehicles.

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