Ford’s Q2 earnings show a thriving trucks, commercial business with EVs playing catch-up
Ford generated $45 billion in revenue in the second quarter, a 12% pop from the same period last year largely fueled by sales of gas-powered trucks like the new Ranger, SUVs and commercial vans. Its EV business, meanwhile, has a long way to go.
Notably, the automaker raised its full-year guidance for 2023 to between $11 billion and $12 billion in adjusted earnings. The company also expects adjusted free cash flow of between $6.5 billion and $7 billion. Ford had previously set a guidance for adjusted earnings to between $9 billion and $11 billion.
Ford noted that while uncertain economic environment and inflationary pressures still exist, it raised the guidance because of an improved supply chain, higher industry volumes, upside from the all-new Super Duty and lower commodity costs. Rival GM also raised its guidance for the year by $1 billion to between $12 billion and $14 billion, before interest and taxes.
It’s not rosy everywhere. Ford now expects its EV business to lose $4.5 billion in 2023.
Ford’s results, which beat Wall Street expectations, and its raised guidance helped push shares higher by more than 3% in after-market trading, before settling.
Ford’s second-quarter results show a company still reliant on sales of its popular gas and hybrid vehicles as well as an expanding commercial business. Ford also appears to be gaining a little ground in the world of EVs.
Ford is a little over a year into a reorganization that split the company into three business units: Ford Blue for gas and hybrid vehicles, Ford Model e for connected EVs and Ford Pro for its commercial products. The company now breaks its earnings into these three units.
CEO Jim Farley has previously said 2023 would be a pivotal year for the automaker with the reorganization giving the 118-year-old Michigan company the speed of a startup that will ultimately turn its EV segment into a profit center.
EVs: Still a money loser
Ford’s EV business is still far from that goal.
The segment reported revenue of $1.8 billion, a 39% increase from the same year-ago quarter. However, it also reported loss of $1.08 billion in adjusted earnings, which was steeper than analysts expected. The company also previously reported a 2.8% drop in EV sales in the second quarter after pausing production at the Mexico factory that assembles the Ford Mustang Mach e.
And those losses will continue. Ford forecast the EV segment will lose $4.5 billion, largely reflecting the present pricing environment, disciplined investment in new products and capacity and other costs, CFO John Lawler said during a call with analysts.
“The near-term pace of EV adoption will be a little slower than expected, which is going to benefit early movers like Ford,” Farley said in a statement. “EV customers are brand loyal and we’re winning lots of them with our high-volume, first-generation products; we’re making smart investments in capabilities and capacity around the world; and, while others are trying to catch up, we have clean-sheet, next-generation products in advanced development that will blow people away.”
Ford said that it expects its EV business to reach a 600,000 run rate in 2024, which is a year delay from its original forecast. Ultimately, the company is targeting a 2 million run rate. Ford originally targeted 2026 to hit that figure, but didn’t provide a date in its most recent earnings report.
The company is sticking with its goal for the EV business to have 8% margin run rate by the end of 2026. “We’re not walking away from that,” Lawler said.
The numbers
Ford generated $45 billion in revenue in the second quarter of 2023, up 12% from the $40.2 billion in revenue it reported in the same period last year.
Ford’s net income (on a GAAP basis) was $1.9 billion for the second quarter. On an adjusted earnings before interest and taxes basis, Ford earned $3.8 billion in the second quarter (about 8.4% of revenue), essentially flat compared to the same period last year.
Operating cash flow for the second quarter jumped to $5 billion and adjusted free cash flow was $2.9 billion. Ford closed out the quarter with nearly $30 billion in cash on hand.
Commercial wins
The big winner was Ford’s commercial, or Ford Pro, business segment, which reported a 22% quarter-over-quarter increase in revenue to $15.6 billion. The segment had $2.4 billion in adjusted earnings, double its profitability from a year ago.
That revenue jump isn’t just due to sales of trucks, although the new Super Duty Work Truck did help. Sales of services and software also contributed to the bottom line. Ford Pro accounts for more than 80% of the company’s nearly 550,000 paid software and services subscribers, to date, including solutions for fleet management, telematics and EV charging, according to the automaker.
