Ford (F) races past Q3 2022 revenue expectations on EV boost, absorbing Argo engineers to boost self-driving tech

Ford (F) released its third-quarter 2022 earnings report after the stock market close today. The automaker has been battling supply chain bottlenecks all year, warning investors of a hit to its bottom line last month.

According to the automaker’s release, Ford beat Q3 2022 revenue as its electric vehicles continue gaining momentum. In addition, the company says it will be transferring its self-driving tech interests internally after a significant loss on its Argo AI investment.

Ford Q3 2022 earnings preview

Earlier today, we released a preview of Ford’s third-quarter earnings, including what you can expect from Wall St analysts.

Ford forecasted Q3 operating profit between $1.4 billion to $1.7 billion, despite Wall St expectations of around $1.8 billion.

According to estimates, Ford is expected to post rising revenue from last year, between $36 billion and $37 billion. As mentioned in the earlier post, a few things to look out for are comments on Ford’s Rivian stake (almost 10%), full-year guidance, and electric vehicle targets.

Up until now, ford has stuck with its guidance for 2022 despite an expected $1 billion hit in additional supply chain costs.

Ford Q3 2022 financial results and analysis

Just after the market close, Ford reported it had exceeded Wall St revenue expectations despite lingering supply chain issues.

Ford’s revenue came in at $39.4 billion, up 10% from last year. Operating profit of $1.8 million was in line with Wall St. forecasts and above Ford’s recent guidance.

Meanwhile, Ford achieved strong operating cash flow of $3.8 billion in Q3. Adjusted free cash flow of $3.6 billion is pushing the automaker’s FY guidance to between $9.5 billion to $10 billion.

The automaker believes the third quarter set the company up for a solid finish to the year and anticipates 2022 operating profit of around $11.5 billion, up about 15% from previous forecasts.

To reach this, Ford says, it will take about 10% YOY growth in wholesale shipments.

Despite this, Ford posted a net loss of $827 million due to a $2.7 billion loss on its Argo AI investment (more on this below).

Ford’s Q3 2022 earnings results were influenced by two things, according to the automaker:

1. Supply shortages resulting in around 40,000 vehicles sitting in inventory awaiting parts
2. A higher-than-expected supplier payment of around $1 billion

The company ended the quarter with $32 billion in cash and $49 billion in liquidity.

Ford’s Q3 electric vehicle progress

Ford says it’s on the “cusp” of an evolution in electric vehicles and that orders continue to grow substantially with unprecedented demand for EVs.

• Ford remained the #2 EV brand in the United States through Q3 2022, behind only Tesla. The automaker says it’s still on track to meet its 600,000 EV run rate by the end of 2023 and 2 million by 2026.
• In Q3, Ford also set new US dealership requirements for dealers to boost electric vehicle deployment.
• Ford broke ground at its BlueOval City in Tennessee, a focal point in Ford’s EV plans which is slated to open in 2025.
• The company will add shifts to boost the Mustang Mach-E production capacity while continuing to scale E-Transit production.
• In Europe, where Ford has led the commercial segment for seven years, Ford revealed the E-Transit custom.
• To meet these targets, Ford continues securing raw materials and battery capacity.
• Ford’s investments in Rivian remained under $1 billion in the third quarter.

Ford expects climate initiatives in the United States to boost demand while offsetting its investments to accelerate EV production capabilities. The automaker says it believes it will meet the requirements for certain Mach-E and F-150 lighting models to receive the federal EV tax credit.

Ford shifts self-driving tech plans internally

During Q3, Ford decided to shift its spending on L4 advanced driver assistance systems being developed by Argo AI to focus on the internal development of L2/L3 technology.

As Argo has failed to attract investors, Ford has posted a substantial loss ($2.7 billion pretax) on its investment in the company. When Ford first invested in Argo, it planned to introduce L4 technology by 2021. However, as Ford’s CEO, Jim Farley, states:

But things have changed, and there’s a huge opportunity right now for Ford to give time – the
most valuable commodity in modern life – back to millions of customers while they’re in their
vehicles.

Before adding:

It’s mission-critical for Ford to develop great and differentiated L2+ and L3 applications that at the same time make transportation even safer.

Ford’s chief also mentioned they would hire talented engineers from Argo as the company dissolves to accelerate internal development. The company says the decision comes as it sees rising interest and margins in other segments, such as Ford Pro and electric vehicles. Although the company is not capital constrained, it will use the investments to drive strategic growth in these areas.

Other observations from Ford’s third-quarter results

• Ford’s auto market share grew in North America to 12.8% (+1.7% YOY) and in Europe to 6.6% (up 0.4% YOY).
• In China, Ford’s market share dropped 0.5% YOY to 2%. The company also noted a quarterly loss due to investments in electric vehicles in the region.
• Ford Pro, the automaker’s portfolio of business services and products, continues gaining momentum, with the company’s electric commercial van, the E-Transit holding a solid lead in full-size commercial trucks and vans in the United States (90%) and Europe.
• Starting next year, Ford will report in three business segments, including Ford Model e (for electric vehicles), Ford Pro (its business products and services), and Ford Blue (ICE vehicles) as the company gets ready to accelerate EV sales.

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