The US stock earnings season is full of thunder!
After Tesla's stock price plummeted by 12% due to underperformance, the veteran automotive giant Ford Motor Company also stepped on the bandwagon. After local time on Wednesday, Ford Motor Company's second quarter financial report fell far below market expectations, causing the company's stock price to plummet by over 12% in the US stock market.
In terms of the Asia Pacific market, today (July 25th), most of the Asia Pacific stock markets followed the adjustment of the US stock market. The Nikkei 225 index fell more than 3% during trading and fell below 38000 points. The index fell 10% from its July high and entered a technical correction zone. The South Korean Composite Stock Index fell more than 2% during trading. However, A-shares have shown relatively strong performance, with both the Shenzhen Component Index and the ChiNext Index floating red during the trading session. The Shanghai Composite Index has also bottomed out and rebounded, and the new energy industry chain such as photovoltaics has set off a surge of limit up.
In the foreign exchange market, the Japanese yen rose above the 153 mark against the US dollar, with an intraday increase of 1%. So, why did the Japanese yen suddenly strengthen?
Ford 'Thunderstorm'
After the close of Wednesday Eastern Time, Ford Motor Company announced its second quarter financial report for this year. Data shows that in the second quarter, Ford Motor Company's revenue was $47.8 billion, a year-on-year increase of 6.2%; The adjusted pre tax profit was $2.8 billion, a year-on-year decrease of 26.3%, and analysts had previously expected a year-on-year decrease of 1.8% to $3.73 billion. Adjusted earnings per share (EPS) for the second quarter were $0.47, a year-on-year decrease of 34.7%, significantly lower than expected. Analysts had previously expected EPS to decrease by 6.9% year-on-year to $0.67.
The warranty cost has seriously dragged down the company's profitability. Compared to the same period last year, Ford's wholesale sales have increased, but the company struggled in the second quarter due to rising warranty costs. The company's Chief Financial Officer John Lawler stated that maintenance costs are related to vehicles from 2021 and earlier. Lawler also pointed out that the new F-series pickup trucks and Explorer SUVs will be launched in the first half of 2024, which has led to increased costs. Lawler stated that with the increase in car inventory, it is expected that car prices will decrease by about 2% in 2024, and prices will decrease in the second half of the year compared to the first six months.
In terms of performance guidance, Ford Motor did not raise its full year profit forecast like its main competitor General Motors did. The company maintained its adjusted pre tax profit forecast of $10 billion to $12 billion for the year, but raised its adjusted free cash flow forecast by $1 billion to between $7.5 billion and $8.5 billion.
As part of the Ford+program, Ford has divided its business into three departments: the Ford Blue division is responsible for traditional gas power business, the Ford Model E division is responsible for electric vehicle business, and the Ford Pro division is responsible for commercial and super truck business. In the second quarter, Ford Blue's revenue was $26.7 billion and its pre tax profit was $1.171 billion; The revenue of Ford's Model E division was $1.1 billion, but the pre tax profit was a loss of $1.143 billion; The revenue of Ford Pro division reached $17 billion, with a pre tax profit of $2.564 billion, becoming a major highlight of Ford Motor Company.
Although Ford's electric vehicle sales increased by 0.8% year-on-year to 536000 units in the first quarter, and electric vehicle sales jumped 61.4% in the second quarter, mainly due to sales of Mustang Mach-E, Ford Lightning pickup truck, and E-Transit EV truck, Ford's Model e division still incurred a loss in pre tax profit. Due to ongoing pricing pressure and investment in next-generation electric vehicles, it is expected that Ford's Model E division will incur a loss of $5 billion to $5.5 billion for the full year of 2024. However, the company vows to improve the profitability of the department as demand continues to rise and car production also increases.
Ford truck sales have shown a recovery, with truck sales increasing by 4.5% to 308900 units in the second quarter. The sales performance of Ford Ranger, Maverick, and Expedition was strong, but the sales of F-series pickup trucks declined by 6% due to the delayed launch of Ford's new F-150 at the beginning of the year. For Ford, the F-series and commercial Super Duty trucks are crucial for its profitability this year and in the future. Ford announced last week that it will increase the production of Super Duty trucks and transform the electric truck assembly plant at its Oakville factory into a super truck assembly plant to meet the market demand for large Super Duty trucks.
It is worth noting that in terms of electric vehicle production, Ford has postponed the production of electric vehicles at its large BlueOval City EV park in Tennessee from the initial 2025 to 2026.
Ford executives emphasized that Ford is continuing to eradicate structural inefficiencies and transform its gas engine and electric vehicle businesses, but Wall Street does not believe it. Morgan Stanley analyst Adam Jonas said to Ford CEO Jim Farley on a conference call, "You said Ford is different from three years ago, but the stock market doesn't seem to agree with your point of view at all
Reuters commented that since taking the helm in October 2020, the CEO of Ford Motor Company has made addressing the quality issues of car manufacturers a top priority. Since then, Ford has hired a new Quality Executive Director and made changes to some production practices to avoid errors, but the number of recalls still ranks first in the industry.
Ford's competitor General Motors announced its second quarter profit and revenue on Tuesday, exceeding Wall Street's expectations, thanks to strong pricing and demand for gasoline powered trucks. The company has raised its annual forecast for the second time this year. However, due to analysts' concerns that the resilience of the automotive industry may not last long, its stock price fell about 6% on Tuesday.
In the second quarter of this year, General Motors achieved revenue of $47.969 billion, an increase of $3.2 billion compared to the same period last year; The adjusted pre tax profit was $3.06 per share, far exceeding analysts' expectations of $2.70. In terms of electric vehicle business, General Motors delivered 22000 electric vehicles during the reporting period, with a year-on-year growth rate of 40%, which is not significantly related to the same period last year.
Tesla, which disclosed its financial report on Wednesday, greatly disappointed the market, causing its stock price to plummet by over 12%. In the second quarter, Tesla's revenue slightly increased by 2% year-on-year, but its net profit decreased by 45% year-on-year, which did not meet Wall Street's expectations. Tesla CEO Musk attributed the decline in sales to fierce competition. He said that the competition in the electric vehicle market is now more intense, and competitors have already introduced price discounts for electric vehicles, which is a challenge for Tesla, but not in the long run.
On the same day, Musk announced during the second quarter earnings conference call that the Robotaxi, originally scheduled to be released on August 8th, would be postponed to October 10th. He stated that additional time is needed to add some new features to Robotaxi. Musk also stated that a more affordable car model will be launched in the first half of next year.
Musk also said, "I would be very shocked if Tesla cannot achieve unsupervised fully autonomous driving (FSD) next year; regulatory approval will not be a limiting factor for Robotaxi, and it is expected that FSD will be approved in China and the European Union by the end of the year
The stock markets of the United States, Japan, and South Korea experienced a sharp decline
On July 24th, the three major indexes of the US stock market collectively fell sharply, with the Nasdaq down 3.64%, the S&P 500 index down 2.31%, and the Dow Jones Industrial Average down 1.25%. Technology stocks plummeted, with Tesla falling 12.33%, Nvidia, ASML, and Qualcomm falling over 6%, Google and Meta falling over 5%, and Microsoft falling over 3%.
Today (July 25th), the Asia Pacific market followed the adjustment of the US stock market. The Nikkei 225 index fell more than 3% during trading and fell below 38000 points. The index fell 10% from its July high and entered a technical correction zone. The South Korean Composite Stock Index fell more than 2% during trading, reaching its lowest point since June 11th. In terms of individual stocks, Renesas Electronics fell over 16%, SoftBank Group fell over 8%, SK Hynix fell over 7%, and Sony and Tokyo Electronics fell over 4%.
In the foreign exchange market, the Japanese yen rose above the 153 mark against the US dollar, with the highest intraday increase reaching 1%. The euro against the Japanese yen and the pound against the Japanese yen also fell sharply. The sharp rise of the Japanese yen is mainly influenced by the expectation of further interest rate hikes at next Sunday's monetary policy meeting of the People's Bank of China. The market believes that the interest rate gap between Japan and the United States will narrow in the future, and the trend of selling US dollars and buying Japanese yen will accelerate. In addition, the rise of the yen was also affected by the sharp decline in the Tokyo stock market in early trading. Foreign exchange intermediaries pointed out that "the demand for safe haven has made the yen sought after".
Reuters reported that the Bank of Japan is expected to discuss interest rate hikes at its monetary policy meeting on July 30th and 31st next week, and provide a detailed explanation of its plan to halve its bond purchases. Zhang Weiliang, macro strategist at DBS Bank, said, "The unease of yen bears is deepening, and Japan's monetary policy may tighten next week, which is in sharp contrast to the upcoming interest rate cuts by the Federal Reserve and the European Central Bank
Tony Sycamore, an IG market analyst, said: "The threat of reducing the purchase of Japanese government bonds and raising interest rates does seem to have triggered the concern we see in the dollar/yen exchange rate. This is also the fact that risk sentiment is deteriorating, which helps (the yen)... I think this is just a perfect storm at this moment."