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Will Dwindling Sales in North America Impair Ford's (F) Q3 Earnings?

Ford’s F third-quarter 2021 earnings are likely to have been impacted by the tanking vehicle sales in North America, the company’s most significant market. The company is set to release quarterly results on Oct 27 after the closing bell.

(Also read: Major Factors Influencing Ford's Earnings This Season)

Q2 Highlights for Ford’s North America Market

In the last reported quarter, the wholesale unit volumes in the North American segment totaled 327,000, up from the 272,000 units reported in the prior-year period. Revenues in the North American segment came in at $15 billion, indicating a jump of 37% year over year. The EBIT totaled $194 million, turning around from a loss of $974 million reported in the corresponding quarter of 2020, thanks to favorable pricing strategy and product mix.

North America Market to Hurt Ford’s Q3 Results

Amid the global semiconductor dearth that the auto industry has been battling, Ford’s third-quarter top and bottom lines are likely to have been bruised from the plunging vehicle sales, particularly in North America.  

Notably, during the third quarter, the company recorded total sales of 400,843 units in the North American market, down 27.4% year over year. While sales of the namesake brand shrunk 26.7%, the same from the Lincoln brand dropped to 17,038 units from the prior-year quarter’s 27,554 units.

In addition, the total truck sales in the quarter came in at 229,738 units, down from the prior-year quarter’s 311,751 units. In fact, sale of America’s best-selling truck, Ford F-Series, totaled 172,799 vehicles in the third quarter, marking a fall of 22% year on year. Further, the demand for SUVs slumped 15.8% to 161,571 during the third quarter. Highlights for Ford’s SUVs in the quarter include year-over-year decreases in Explorer and Expedition. Sales for the Explorer dropped 26.4%, 56.9% and 5.3% year over year, respectively, for the months of July, August and September, while sales for Expedition dipped 6.8%, 12.4% and 20.9% year over year, respectively.

The demand for passenger cars plummeted 80.2% year over year to 9,534 units in the quarter, majorly due to the declining sales of Fusion, Mustang and GT models.

Consequently, the Zacks Consensus Estimate for quarterly revenues for the North American region is pegged at $23,073 million, indicating a fall from the year-ago figure of $25,300 million. Further, the consensus mark for wholesale unit volumes in the North American segment is pegged at 548,000 for the quarter under discussion, indicating a drop from the 651,000 units reported in the prior-year period. Additionally, the consensus estimate for the segmental EBIT is pinned at $1,743 million, calling for a 45.2% slump year over year.

On a bright note, the company’s electrified vehicle (EV) portfolio continues to attract new customers to the brand at a higher rate during the quarter. In fact, Ford’s electrified vehicle sales for the months of July, August and September were 9,103, 8,756 and 9,150, respectively, reflecting a year-over-year increase of 57.5%, 67.3% and 91.6%.

Thus, while the EV sales remained strong during the quarter, decline in the overall vehicle deliveries is likely to have weakened the company’s third-quarter performance. 

Ford’s Overall Earnings & Revenue Projections for Q3

The Zacks Consensus Estimate for Ford’s third-quarter earnings is pegged at 29 cents a share, suggesting a fall of 55.38% year over year. Also, the Zacks Consensus Estimate for the quarterly sales of $34.23 billion calls for a 1.37% decline on a year-over-year basis.

Investors should note that our proven model does not predict a conclusive earnings beat for Ford this season. The combination of a positive Earnings ESP, and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Ford — which shares space with auto biggies including General Motors GM, Stellantis STLA and Toyota TM — currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Ford Motor Company (F): Free Stock Analysis Report
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