Ford's Short Supply

Ford's Short Supply Ford stock dropped 12% Tuesday for its worst day in 11 years. The company said its third-quarter earnings would come in light due to continued supply-chain woes. Ford said it would have 40,000 to 45,000 "vehicles in inventory at end of third quarter lacking certain parts presently in short supply." Worse, the company said those cars "disproportionately include high-demand, high-margin models of popular trucks and SUVs." Finally, the company said that "inflation-related Q3 supply costs" would be about $1 billion "above plan." For nervous investors, the Ford warning was a second blow coming just days after FedEx warned about its own results and withdrew its annual outlook late last week.  The good news for Ford is the company still plans to meet its full-year profit guidance, with the delays mostly pushing sales into the fourth quarter.  Despite the stock's dismal reaction, Barron's Al Root found some good news within Ford's update:  The magnitude of that miss actually isn’t all that bad. RBC analyst Joseph Spak broke down the shortfall, writing that the unfinished vehicles cost the company about $600 million in operating profit, or roughly $14,000 each. (For Ford’s entire lineup, including lower-margin cars, the per-unit operating profit for vehicles sold in the first half of 2022 was about $3,000.) That $600 million, plus the $1 billion in higher costs, is $1.6 billion, higher than the $1.4 billion miss relative to the Wall Street consensus. The implication is that Ford might have beaten expectations for the third quarter by about $200 million in a normal operating environment. Still, investors aren't looking for silver linings right now. FedEx stock tumbled 21% on Friday after its own warning -- its worst day ever.  For more on Ford, read Al's coverage here.