Ford F-150 Lightning at the 2022 New York Auto Show.
Scott Mill | CNBC
DETROIT — Ford Motor shares are coming off their worst day in more than 11 years, after the automaker pre-released part of its third-quarter earnings report and warned investors of $1 billion in unexpected supplier costs.
Ford shares were trading at around $1[ads1]3.10 a piece on Tuesday afternoon, down more than 12%. If the losses hold until the end, it will knock about $7 billion off the company’s market value.
It would also be the stock’s worst day on a percentage basis since Jan. 28, 2011, when the automaker’s fourth-quarter earnings disappointed investors and the stock fell 13.4% to close at $16.27 a share, according to data compiled by FactSet.
Ford, after markets closed Monday, said supply issues have resulted in parts shortages affecting about 40,000 to 45,000 vehicles, mostly high-margin trucks and SUVs that have been unable to reach dealers.
Despite the problems and additional costs, Ford reaffirmed its guidance for the year but set expectations for third-quarter adjusted earnings before interest and taxes to be in the range of $1.4 billion to $1.7 billion. That would be significantly below the forecasts of some analysts, who estimate quarterly profits closer to $3 billion.
Ford cited recent negotiations that resulted in inflation-related supplier costs that will run about $1 billion higher than originally expected.
While no major Wall Street analysts downgraded the stock in light of the update, several were caught off guard by Ford’s announcement. The expectation was that supply chain problems would lessen. Moreover, Ford had recently avoided such problems better than some of its competitors.
Goldman Sachs analyst Mark Delaney said his firm was “surprised by the Q3 advance announcement given the progress that Ford had previously made on supply chain bottlenecks.”
BofA Securities analyst John Murphy echoed those sentiments in a note to investors on Tuesday: “Ultimately, this news is somewhat surprising as broader macro news suggests that supply chains have been gradually improving in recent months.”
Several analysts questioned whether this was a Ford-specific problem, or a red flag for further trouble for the auto industry.
In July, GM warned investors that supply chain issues would significantly impact second-quarter earnings, while maintaining guidance for 2022. The automaker said it had about 95,000 vehicles in its inventory that were produced without certain components that were expected to be completed during second half of the year.
Ford said the unfinished vehicles are expected to be completed and shipped to dealers in the fourth quarter.
The company’s shares are down more than 35% so far this year, but still up approx. 2% in the last 12 months.
– CNBC Christopher Hayes and Michael Bloom contributed to this report.