Shares of Ford Motor Co. are tumbling Thursday after the automaker's second-quarter adjusted profit badly missed Wall Street's expectations as it spent more money fixing customers’ cars and trucks.
Late Wednesday Ford reported an adjusted profit of 47 cents per share. That was far short of industry analysts’ estimates of 68 cents, according to FactSet.
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Warranty costs have vexed the nation’s second-largest automaker for several years and lopped billions off of its profits. In the second quarter, warranty and recall costs totaled $2.3 billion, $800 million more than the first quarter and $700 million more than a year ago.
Ryan Brinkman of JPMorgan said in an analyst note that the weaker-than-expected quarterly profit was surprising, particularly when General Motors reported a strong performance a day earlier. Brinkman outpointed that warranty costs were the culprit at Ford, which were above his expectation for flat to lower costs sequentially.
“Ford management believes its initial quality on newly built vehicles has since improved, implying stronger-than-might appear current-period execution and lower future-period warranty expense, although we do not expect investors to give Ford a pass, including given the automaker has intermittently struggled with higher repair costs for coming on several years,” he wrote.
Shares slid nearly 17% in midday trading.