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Ford Cuts Profit Outlook, Faces Stock Drop

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Ford Motor Co. announced on Monday that it now anticipates meeting only the lower end of its full-year profit expectations, leading to a 5% dip in after-hours stock trading. The automaker forecasts annual earnings before interest and taxes (EBIT) around $10 billion, down from the previous $10-12 billion target.

Financial Performance and EV Adjustments

Despite its weakened forecast, Ford’s third-quarter earnings came in slightly better than expected, with adjusted profits of $0.49 per share compared to analysts’ projections of $0.47. However, net income dropped to $900 million, or $0.22 per share, from $0.30 per share a year ago, influenced by a $1 billion charge incurred after the cancellation of a three-row electric SUV in August.

CEO Jim Farley’s strategic cutbacks in Ford’s electric vehicle (EV) segment reflect intensified competition from Tesla and emerging Chinese EV brands. The scrapped three-row EV, once projected as a “personal bullet train,” was ultimately deemed unprofitable within the necessary timeframe for EV business sustainability.

EV Losses and Cost-Cutting Initiatives

Ford’s electric vehicle segment is projected to incur a $5 billion loss this year, with an EBIT loss of $1.2 billion in the third quarter alone, raising the segment’s total loss for 2024’s first three quarters to $3.7 billion. Although the company made cost improvements totaling nearly $1 billion over the past year, industry-wide pricing pressures have limited visible gains.

Looking ahead, Ford remains committed to cutting $2 billion in annual expenses by year-end through reductions in materials, manufacturing, and freight costs. Chief Financial Officer John Lawler noted that pricing pressures are likely to persist, potentially offsetting cost gains.

Market Reactions and Competitor Insights

Ford’s stock has declined 6% this year, a relatively smaller drop than Jeep-manufacturer Stellantis, whose shares have fallen by 40%. Conversely, General Motors has led the “Big Three” automakers in stock performance, with shares up 47% following robust earnings and consistently improved financial guidance.

 

5 Things to Know Before the Stock Market Opens Monday

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  1. Running to Records U.S. stocks are riding a steady climb to new highs. Both the S&P 500 and Dow Jones Industrial Average closed at record levels on Friday, with the Nasdaq Composite also showing strong gains. Last week saw all three indexes rising by over 1%. As the markets focus on several key events, including the U.S. presidential election, conflicts in the Middle East, and Federal Reserve policy, this week’s earnings reports will further shape the stock market’s trajectory.
  2. Banking on Earnings This week will be packed with earnings reports from major companies, especially from the financial sector. Last Friday, JPMorgan Chase and Wells Fargo exceeded expectations, helping push stock markets higher. Among the big names to report earnings this week are:
    • Tuesday: Johnson & Johnson, Bank of America, Walgreens Boots Alliance, Goldman Sachs, Citigroup, United Airlines
    • Wednesday: Morgan Stanley
    • Thursday: Netflix
    • Friday: Procter & Gamble
  3. Boeing Cuts Boeing is grappling with financial challenges as it plans to cut 17,000 jobs, representing 10% of its workforce. This comes amid production disruptions caused by a machinist strike and ongoing difficulties. The company is also delaying the delivery of its 777X wide-body plane until 2026, and expects to report a significant third-quarter loss of $9.97 per share. CEO Kelly Ortberg outlined the tough restructuring decisions necessary to keep the company competitive.
  4. SpaceX Milestone SpaceX achieved a key breakthrough on Sunday with the successful fifth test flight of its Starship rocket. In a historic first, the rocket’s booster was caught by the launch tower arms after its ascent. This marks a crucial step toward making the Starship system reusable. After launching, the rocket entered space and traveled halfway around the Earth before splashing down in the Indian Ocean.
  5. 2024 Policy Stakes The 2024 U.S. election carries major implications for corporate America. Vice President Kamala Harris and former President Donald Trump hold divergent views on key issues like taxes, tariffs, regulation, healthcare, and clean energy. The election’s outcome will likely have significant impacts on industries such as airlines, banks, electric vehicles, and technology. The policies proposed by each candidate could lead to vastly different outcomes for companies across sectors.

Jim Cramer Advises Caution on Tesla Stock After Cybercab Debut Flops

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After Tesla’s highly-anticipated Cybercab debut underwhelmed investors, CNBC’s Jim Cramer urged caution for those holding Tesla stock. Despite the excitement surrounding the unveiling of Tesla’s new robotaxi, the event fell short of delivering crucial details, leading Cramer to recommend a neutral approach to the stock.

During his show, Mad Money, Cramer commented that while Tesla CEO Elon Musk presented a visually impressive robotaxi concept, the lack of substantive information about the vehicle’s costs and rollout timeline left much to be desired. Cramer noted that investors should “stay on the sidelines” for now, as Tesla’s future in autonomous driving is still unclear.

Disappointing Market Reaction

Tesla, which has struggled with weak financial quarters earlier this year, needed a significant win to regain momentum. Musk had teased self-driving technology as a way to differentiate Tesla from other electric vehicle (EV) makers, especially as competition from Chinese EV companies intensifies. However, the Cybercab event failed to meet market expectations, and by the close of trading on Friday, Tesla shares had dropped 8.78%.

Cramer acknowledged that while it’s tempting to short Tesla stock after such a significant market reaction, he advised against it, calling it “dangerous to bet against Elon Musk.” The uncertainty around Tesla’s autonomous driving capabilities has caused investors to question whether Tesla can make the transition from being seen purely as an EV maker to a legitimate player in the self-driving space.

Competitive Landscape

As Tesla stumbled, rideshare companies like Uber and Lyft saw their stocks rise, with Uber hitting an all-time high. The threat that Tesla’s robotaxis could pose to rideshare companies has seemingly diminished for now, as the lack of concrete details from Tesla’s event reassured investors that Cybercab won’t be disrupting the rideshare industry anytime soon.

Tesla’s challenge extends beyond the unveiling flop. Cramer emphasized that the EV market, once expected to be vast and profitable, has proven smaller than anticipated. For Tesla to successfully pivot to self-driving technology, it will need to offer more than flashy concepts and provide the kind of specific, actionable details investors and analysts crave.

In closing, Cramer reiterated his stance, advising investors to wait and see before making any moves with Tesla stock, given the uncertainty surrounding its autonomous driving ambitions.