Ford Motor Company (F -1.92%) stock would have ended 2023 in the red if not for a rebound in the last month of the year. Ford stock surged 18.8% in December, according to data provided by S&P Global Market Intelligence, as investors bet on better days ahead for the automaker amid an anticipated fall in interest rates.
Ford's outlook for 2023 isn't that worrisome
Ford sold roughly 800 fewer vehicles in November year over year, with sales of its internal combustion vehicles, including trucks, slipping as the company worked through production hiccups amid a long-standing workers' strike. Labor contracts with the United Auto Workers (UAW) have been a recurring hurdle for automakers, but 2023 was particularly challenging. Ford suffered its first UAW work stoppage in almost 50 years, and that significantly crippled its production and sales and hurt profits. Ford also withdrew its guidance for 2023 in October last year amid the strikes.
Ford finally reached a new UAW agreement and announced its updated outlook for the year on Nov. 30. Although it will cost the company heavily, investors heaved a sigh of relief as they got visibility into Ford's 2023 operational performance and plans for 2024.
Ford expects the new labor contract to cost $8.8 billion over the life of the contract, which runs through April 2028. That translates into roughly $900 per vehicle, and Ford expects to offset the cost by cutting expenses and boosting productivity. For 2023, Ford now expects to generate adjusted earnings before interest and taxes (EBIT) between $10 billion and $10.5 billion, down from its previous guidance of $11 billion-$12 billion.
Yet, when you compare Ford's latest 2023 outlook with its actual 2022 adjusted EBIT of $10.4 billion, it's a testament to the company's resilience. Demand for Ford's vehicles remains strong, as evidenced by its latest sales numbers for 2023.
Ford's U.S. sales rose 7.1% to nearly 2 million vehicles in 2023. While the Ford F-Series remains America's best-selling truck for the 47th year in a row, Ford's F-150 Lightning and F-150 Hybrid emerged as the top-selling electric and hybrid pickup trucks, respectively, in 2023. Ford sold a record number of electric vehicles (EVs) in 2023 between its F-150 Lightning pickup truck, Mustang Mach-E, and E-Transit vans. F-150 Lightning sales surged 55% over 2022.
Ford could face some challenges in 2024
Ford's CEO Jim Farley is upbeat about 2024 and says the company is "spring-loaded" for the year, with new versions coming of "its most popular trucks and SUVs, a full year of new Super Duty and Mustang, and a big year for Lincoln."
Unfortunately, the automaker's growth driver, EVs, could pose a challenge in 2024 as the industry faces a slowdown amid higher interest rates and low subsidies. Ford is reportedly planning to cut production of F-150 Lightning pickup trucks by half this year. With Ford's EV business losing money and burning cash rapidly, any fall in demand and sales at this point will be detrimental to the company.
Yet, with Ford's stock falling nearly 12% in 2023 through November and its yield crossing 5%, investors saw an opportunity to buy the stock before the new year, particularly in anticipation of a fall in interest rates this year.
