Ford Surpasses Q1 Expectations as Legacy and Fleet Business Thrive Amid EV Losses

Ford Motor Company recently reported its first-quarter results for 2023, exceeding Wall Street's expectations as the automaker's fleet and legacy operations performed strongly despite increasing losses in its electric vehicle (EV) segment.

According to Refinitiv's average estimates, Ford's earnings per share reached 63 cents on an adjusted basis, compared to the expected 41 cents. Automotive revenue amounted to $39.09 billion, surpassing the anticipated $36.08 billion. Despite the significant beat, Ford maintained its previously announced 2023 guidance of adjusted earnings between $9 billion and $11 billion and approximately $6 billion in adjusted free cash flow. Ford plans to have capital expenditures of between $8 billion and $9 billion in 2023.

The automaker confirmed that it expects to lose around $3 billion from its EV operations, known as Model e, in 2023. Model e reported losses of $722 million in the first quarter. However, these losses were offset by Ford's traditional car business (Ford Blue), which earned $2.6 billion, and Ford Pro fleet operations, which reported $1.4 billion in earnings. Both business segments were profitable in every region where they operate.

For the first time, Ford reported its financial results by business unit instead of by region. The company also released revised results for 2021 and 2022. Wall Street is closely monitoring Ford's Model e unit and any comments on EV pricing, following Tesla's price changes. Automakers are attempting to balance growth and losses/profits when it comes to EVs.

In a bid to increase production and reopen order banks for the Mustang Mach-E crossover, Ford announced that it would once again cut the vehicle's starting prices by thousands of dollars. This decision came under additional pressure after General Motors, Ford's crosstown rival, raised key guidance for 2023 and reported results that topped Wall Street's top- and bottom-line forecasts. GM raised its adjusted earnings expectations to a range of $11 billion to $13 billion, or $6.35 to $7.35 per share, and adjusted automotive free cash flow expectations to between $5.5 billion and $7.5 billion.

Ford's first-quarter revenue reached $41.5 billion, up 20% from the previous year and beating the expected $36.1 billion. Earnings per share amounted to $0.63, higher than the $0.41 predicted by analysts. Last year, Ford reported a net loss of $3.1 billion during its first quarter due to losses related to its investment in EV maker Rivian (RIVN).

Ford's first-quarter results by business segment are as follows:

• Ford Blue: $25.1 billion in revenue, $2.623 billion in EBIT, and a 10.4% EBIT margin.
• Ford Model e: $700 million in revenue, a ($722 million) EBIT, and a -102% EBIT margin.
• Ford Pro: $13.2 billion in revenue, $1.366 billion in EBIT, and a 10.3% EBIT margin.

Ford's Q1 EV shipments and revenue were limited by production interruptions of two popular vehicles: the Mustang Mach-E SUV, due to industrial changes aimed at doubling manufacturing capacity, and the F-150 Lightning pickup, to address a battery issue before it became a problem for customers.

As for its outlook, Ford reaffirmed key metrics that it issued in late March during its teach-in with investors and Wall Street analysts regarding the reporting structure for its three new business units and expectations for the company overall. Full-year adjusted EBIT is expected to come in at $9 billion-$11 billion, with adjusted free cash flow of about $6 billion. Segment level EBIT expectations for 2023 are as follows:

Ford Blue: The company anticipates an EBIT margin of 10% for its legacy business, with continued strong performance in the traditional car segment. The focus will remain on improving operational efficiency and investing in new technologies to maintain its position in the market.
Ford Model e: Ford expects Model e's losses to persist throughout 2023, with an estimated loss of around $3 billion. However, the company remains committed to investing in its EV segment, with the goal of achieving profitability in the coming years. Continued development and expansion of its EV lineup, as well as increased production capacity, are expected to contribute to future growth.
Ford Pro: The commercial and fleet operations segment is expected to maintain its 10% EBIT margin in 2023, as the company continues to expand its product offerings and customer base. Ford Pro aims to leverage its strong brand reputation and experience in the commercial vehicle space to capitalize on the growing demand for electrified fleet solutions.
Ford's ambitious electrification plans include investing over $30 billion in electrification through 2025, aiming to have 40% of its global sales be fully electric by 2030. The company plans to introduce new electric models across its lineup, including the highly anticipated F-150 Lightning, E-Transit van, and future models within the Mustang Mach-E family.

Despite the challenges and losses in the EV segment, Ford's robust performance in its legacy and fleet operations, coupled with its strategic investments and commitment to EV growth, suggest a promising future for the automaker as it navigates the ongoing transition towards electrification in the automotive industry.