Ford Motor Co. is experiencing a rocky road as its shares take a tumble following a disappointing second-quarter earnings report. The automaker’s adjusted profit fell well below Wall Street’s expectations, causing concern among investors.
In its report released late Wednesday, Ford revealed an adjusted profit of 47 cents per share, significantly lower than the 68 cents per share estimated by industry analysts at FactSet.
One of the main culprits behind Ford’s profit miss is its ongoing struggle with warranty and recall costs. In the second quarter alone, these costs amounted to a whopping $2.3 billion, a sharp increase from the previous quarter and the same period last year.
Analyst Ryan Brinkman of JPMorgan noted that Ford’s weak quarterly performance came as a surprise, especially compared to the strong showing by rival General Motors. Brinkman pointed to elevated warranty costs at Ford as the primary reason for the disappointing results.
Despite Ford’s efforts to improve its initial vehicle quality, which could lead to lower future warranty expenses, investors remain skeptical. The automaker has been grappling with high repair costs for years, making it difficult for shareholders to overlook the latest earnings miss.
As a result of the disappointing report, Ford’s shares plummeted by nearly 17% in midday trading, highlighting the challenges facing the company as it navigates a competitive and rapidly changing market.