Ford earnings preview: Prices, production, and profitability in focus
Carl Court/Getty Images News

Ford Motor Company (NYSE:F) is set to post its fourth quarter earnings report after the bell on Thursday, just days after a bullish report from rival GM (GM) helped lift the auto sector.

Analysts anticipate the Dearborn-based automaker will report $0.62 in earnings per share on $40.73B in revenue for the quarter. The manufacturer has beaten EPS estimates in 6 of the past 8 quarters, while exceeding revenue expectations in 5 of the past 8 reports. 

In focus for the automaker are price cuts to its Mustang EV to compete with Tesla (TSLA) and cost-cuts to maintain profits amid the escalating price war. The cost of the Mach-E will now be, on average, $4.5K lower than initially priced.

âIn our opinion, cutting price on the Mach-E is relatively minor. The more significant question for Ford and other Tesla challengers is what are they doing on the cost side to create enough room to follow Tesla's current and future price cuts without compressing margins,â Morgan Stanley analyst Adam Jonas advised clients ahead of the results. âWe expect to see a flurry of subsequent price cuts across EV competition throughout the year from startups and legacy players. In a year defined by slower growth, rising rates and consumer austerity we believe manufacturing and design innovation will separate EV winners from the pack.â

On that front, Jonas remained optimistic about Fordâs (F) prospects, assigning the stock an Overweight rating. He advised clients that the company should be able to maintain discipline in capital expenditure to defend its bottom line in 2023.

Elsewhere, union disputes and production timelines for new models, particularly EV models, will be closely monitored as supply chain constraints are expected to ease. The car and truck manufacturer has been particularly eager to trim expenses in Europe. German unions have threatened action if plants are indeed shuttered. That union dispute pales in comparison, however, to UAW contract negotiations that loom over automakers in 2023.

Analysts remain somewhat divided on the stock ahead of earnings. According to Seeking Alpha surveys, there are 9 Hold ratings, 10 Buy or Strong Buy ratings, and 3 Sell or Strong Sell ratings. The overall consensus moved to a Buy on January 23.

JP Morgan analyst Ryan Brinkman voiced his bullish view ahead of the report, indicating his expectation of âsolid Q4 profitsâ and âbetter productionâ in 2023. He assigned a $15 price target to the stock alongside his Overweight rating.

On the other end of the spectrum, Wells Fargo analyst Colin Langan warned about a potentially poor earnings result and forecast. As such, he rated the stock at Underweight with a $10 price target.

âWe believe that the rise in battery raw material costs has negatively impacted the outlook for BEV profitability, and consequently, F's profitability,â he told clients. âMoreover, US fuel economy regulations will likely force automakers to sell BEVs to meet targets. Overall, we also see limited near-term catalysts, as normalization of new vehicle pricing and higher input costs likely offset expected volume increases.â

Shares of Ford (F) have fallen 33% over the past year. However, the stock has started 2023 with a nearly 20% gain.
Read more on why Mott Capital Management says Ford is facing a âbig declineâ in 2023.