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Ford (F) Updates Outlook After Ratification of Labor Contract

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Ford Motor Company (F - Free Report) provided a full-year 2023 guidance for operating results after withdrawing it amid the United Automobile Workers’ (“UAW”) strike. It now expects full-year adjusted earnings before interest and taxes (EBIT) in the band of $10-$10.5 billion, down from the previously forecasted range of $11-$12 billion in July.

The automaker said that rising labor costs from new labor contracts would result in lower profits than previously estimated. It expects labor costs to increase by $8.8 billion over the life of the contract. Gross wages, accelerated wage progression and cost-of-living adjustments are believed to be the main contributors to rising costs.

The trimmed guidance for adjusted EBIT includes a $1.7 billion strike-related loss, of which $1.6 billion was incurred in the fourth quarter due to lower-than-anticipated production of high-margin trucks and sports utility vehicles (“SUVs”). The wholesale production was around 100,000 units lower than expected due to work stoppage.

Per John Lawler, chief financial officer of Ford, the cost impact is estimated to be around $900 per vehicle by 2028 or around 60 to 70 basis points of adjusted EBIT margin. Ford will strive to offset the cost through enhanced productivity and lower spending.

In the first nine months of 2023, Ford generated net income and adjusted EBIT of $4.9 billion and $9.4 billion, respectively. For full-year 2023, the automaker expects adjusted free cash flow in the range of $5-$5.5 billion.

Zacks Rank & Key Picks

F currently carries Zacks Rank #3 (Hold).

Some better-ranked players in the auto space are Volvo (VLVLY - Free Report) , Renault SA (RNLSY - Free Report) and BYD Company Limited (BYDDY - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for VLVLY’s 2023 sales and earnings indicates year-over-year growth of 4.2% and 65.6%, respectively. The consensus estimate for 2023 earnings per share (EPS) has increased 2 cents in the past 30 days. The consensus mark for 2024 EPS has increased 11 cents in the past 60 days.

The Zacks Consensus Estimate for RNLSY’s 2023 sales and earnings indicates year-over-year growth of 4.5% and 128.1%, respectively. The bottom-line estimate for 2023 and 2024 has increased 15 cents and 2 cents, respectively, in the past 30 days.

The Zacks Consensus Estimate for BYDDY’s 2023 sales indicates year-over-year growth of 160.2%. The bottom-line estimate for 2023 and 2024 has increased 62 cents and 57 cents, respectively, in the past 60 days.

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