What’s Wall Street Expecting from Ford’s Q1 2023 Earnings

Ford (NYSE: F) would release its earnings for the first quarter of 2023 tomorrow after the close of US markets. Here’s what Wall Street is expecting from Ford’s earnings report.

Notably, this would be the first quarter when Ford would release the results of its legacy ICE (internal combustion engine) separately from the EV (electric vehicle) and commercial business.

The automotive giant has renamed its ICE business as Ford Blue while the EV business has been rechristened as Model e. The company’s third business segment Ford Pro would look after the commercial vehicle business.

The company’s previous earnings call led to a crash in its stock price as it missed on its guidance which CEO Jim Farley blamed on poor execution.

Ever since he took over as the CEO in 2020, Farley has been trying to transform the business, and under his stewardship, the company has exited some of the loss-making markets.

What to expect from Ford’s Q1 2023 earnings?

Analysts polled by TIKR expect Ford to report revenues of $37.4 billion in the first quarter – a YoY rise of 16.5%. Its adjusted EPS is also expected to rise by 15.1% to $0.44.

Ford sold 456,972 vehicles in America in the first quarter of 2023 which made it the best-selling brand. The company’s EV sales meanwhile plummeted and it fell to the fifth rank in electric car sales.

Ford’s vehicle sales soared 10.7% in the first quarter led by higher sales of F-series, Mustang, Bronco, and commercial vehicles. The company’s F-series trucks have been America’s best-selling truck for 46 years in a row and now it is banking on its all-electric avatar – the F-150 Lightning to drive sales.

What to watch in Ford’s Q1 2023 earnings?

Markets would watch the trajectory of Ford’s EV business – which it has forecast would lose $3 billion in 2023. The company might also provide an update on the production ramp-up.

Ford expects its annual EV production run rate to hit 2 million by 2026. It is targeting an annualized production capacity of 600,000 by the end of this year. The company was the second-best-selling EV brand in the US in the fourth quarter but fell to fifth rank in the first quarter of 2023 on account of production loss.

It might also provide some color on the order book of F-150 Lightning – whose prices it recently hiked. The price hike came despite the ongoing price war in the EV industry. Fortunately for Ford, there are not many electric pickup models which gives it good pricing power.

Tesla Cybertruck is coming this week

Things are set to soon change as Tesla would start delivering its Cybertruck – which was first unveiled in 2019 – later this year. The company however does not expects mass production to start until 2024.

Tesla has set itself a target of producing 20 million cars annually by 2030. To put that in perspective, Toyota, the world’s largest automaker, sold just over 10 million cars in 2022. Tesla expects to produce around 1.8 million cars in 2023 and said that it has the capacity to produce as many as 2 million cars.

To achieve the goal of 20 million deliveries, which amounts to a CAGR of over 41% between 2023 and 2030, Tesla might need to build many more Gigafactories. In the past, Musk said that the company would need over a dozen Gigafactories to reach that goal.

Currently, it has four plants of which two, Berlin and Austin, are in the process of ramping up production and has announced another Gigafactory in Mexico.

Markets would watch Ford’s guidance

Markets would also watch Ford’s 2023 guidance. During the Q4 2022 earnings call, the company forecasted between $9 billion-$11 billion in adjusted pre-tax earnings for 2023. The guidance was lower than what markets were expecting.

Markets would now watch any update to the guidance amid the deteriorating market conditions. During Tesla’s Q1 2023 earnings call last month CEO Elon Musk blamed Fed’s rate hikes and worsening economy for dampening car sales.

Farley might comment on the “execution issues”

During the Q4 2022 earnings call, Farley said that Ford left around $2 billion of profits on the table due to poor execution. During the Q1 2023 earnings call, he might update markets on whether the company has managed to address some of the issues during the quarter.

Ford might also talk about the EV price war as the company lowered Mach-e prices during the first quarter following Tesla’s price cuts.

EV Competition

Legacy automakers are also ramping up production and both Ford and General Motors are investing billions of dollars to enhance their EV production. Volkswagen has also stepped up its game in the EV space and is targeting a 10% US market share by the end of this decade which is over twice the current share.

EV competition is set to intensify in the coming months which might only escalate the price war. Pricing pressure would meanwhile increase the troubles for startup EV companies that are posting losses.

All said, by separately reporting its EV business from the legacy business, Ford has set the template for other automakers also. The move would help markets better analyze the results as the EV businesses of legacy automakers are posting losses.

Ford wants markets to see its EV business as a startup and at an event earlier this year, the company’s CFO John Lawler said, “As everyone knows, EV startups lose money while they invest in capability, develop knowledge, build (sales) volume, and gain (market) share.”