Ford Stocks Suffer the lowest in 11 years, Bleeds $7 billion in Market Value

The Ford Motor Company has recorded its lowest ever level in more than 11 years after the manufacturer pre-released a portion of its third-quarter earnings report.

Ford Motor Company's shares dropped to its lowest level in more than 11 years after the carmaker pre-released a portion of its third-quarter earnings report and warned investors of $1 billion in unexpected supplier expenses. Ford stock finished Tuesday at $13.09 per share, down 12.3%. The Detroit automaker's market worth dropped by around $7 billion.

It was also the company's worst day in terms of percentage loss since Jan. 28, 2011, when the automaker's fourth-quarter earnings disappointed investors and the stock fell 13.4% to end at $16.27 per share, according to FactSet data.

Following the closure of the markets on Monday, Ford stated that supply issues had resulted in component shortages impacting around 40,000 to 45,000 cars, particularly high-margin trucks and SUVs that haven't been able to reach dealers. Despite the issues and additional costs, Ford maintained its fiscal year projection, but projected third-quarter adjusted profits before interest and taxes to be in the $1.4 billion to $1.7 billion range. This would be much lower than some experts' projections of a quarterly profit closer to $3 billion.

Ford noted recent discussions that resulted in inflation-related supplier costs that are around $1 billion more than projected.

While no prominent Wall Street analysts downgraded the stock as a result of the update, many were taken aback by Ford's disclosure. The supply chain concerns were expected to ease. Furthermore, Ford has recently avoided similar issues better than some of its competitors. “Our firm was surprised by the 3Q pre-announcement given the progress that Ford had previously made on supply chain bottlenecks", said Goldman Sachs analyst Mark Delaney.

John Murphy, BofA Securities Analyst expressed the same feelings in note on Tuesday to investors: “Ultimately, this news is somewhat surprising as broader macro news suggest supply chains have gotten incrementally better over the last few months.”

Many analysts questioned if this was a Ford-specific issue or a precursor to bigger issues for the whole automobile sector. “We are seeing an improved situation,” Barra said. “We keep working, solving issues, looking for efficiencies as a normal course, and we’re going to continue to do that”, said Mary Barra, GM CEO on Tuesday that the supply chain issues of the company has been easing up.

By the end of the year, around 95,000 vehicles in GM's inventory that were constructed without certain components because of supply chain issues will be finished, according to Barra. GM maintained its 2022 projection despite alerting investors in July that supply chain difficulties would have a major impact on its second-quarter profitability.According to Ford, its unfinished vehicles should be finished and delivered to dealers in the fourth quarter. Ford spokesperson T.R. Reid responded to the decline on Tuesday by stating that the corporation is still carrying out its Ford+ restructuring strategy.

He further added that, "“Markets are efficient over time. We’ve got a great plan at Ford+ to create value for customers, and investors and other stakeholders over time. It’s our obligation to execute against it and create that opportunity.”

Ford's stock is down more than 36% for the year, although it has increased by roughly 2% over the previous 12 months.