Ford Motor (F.US) just announced financial results that fell short of Wall Street's expectations. On Thursday, the stock fell more than 18%, to $11.16.

After Wednesday's close, Ford announced second-quarter operating profit of $2.8 billion, a 26% decrease from $3.8 billion in the second quarter of 2023. According to FactSet data, Wall Street's expectations were for $3.7 billion. Investors were disappointed with the result, and Ford fell by its largest one-day decline since November 18, 2008. The S&P 500 index fell 0.5%, while the Dow Jones Industrial Average rose 0.2%.

Ford's traditional automotive business, Ford Blue, achieved operating profit of $1.2 billion in the second quarter, an increase of $0.3 billion from the first quarter. However, the performance of this business still fell short of expectations, as high warranty costs continued to drag down performance. Warranty costs increased by $0.8 billion from the first quarter, making the quarterly warranty costs approximately $2 billion, or 4% of sales. For an automotive company, this is a relatively high proportion. However, Ford stated that these costs were mainly related to models from 2021 and earlier.

Freedom Capital Markets analyst Mike Ward wrote in a report on Thursday, "Ford's warranty issues have been gradually increasing over the past five years and have been upgraded in the past year." From 2011 to 2019, warranty costs averaged 1.6% of revenue, but since early 2022, warranty costs have averaged 2.9% of revenue, and in the second quarter, warranty costs exceeded 4%. Ward gave Ford stock a "buy" rating and set a target price of $17.

Ford's electric vehicle business, Model E, reduced its losses in the second quarter, which is a positive sign. The business lost $1.1 billion, compared to $1.3 billion in the first quarter.

Ford's commercial business, Ford Pro, achieved a profit of $2.6 billion in the second quarter, a decrease from $3 billion in the first quarter of 2024. However, the business's operating margin of 15.1% was the best among its three business segments and remained the same as the same period last year.

Despite this, the company's overall operating profit still fell short of expectations.

For Ford investors, a positive message is the company's full-year guidance. Ford still expects to achieve approximately $11 billion in operating profit for the year, which is in line with the midpoint of the guidance issued in April. Operating profit for 2023 is $10.4 billion. This guidance implies that approximately $5.5 billion in operating profit will be achieved in the second half of the year, while Wall Street's current expectation is for approximately $4.6 billion.

"However, investors hope to see quarterly performance that exceeds expectations and raises expectations. On Tuesday, General Motors announced better-than-expected second-quarter results and raised its full-year operating profit guidance from $12.5 billion to $14.5 billion to $13 billion to $15 billion. However, this did not help General Motors' stock price, which fell more than 6% on the day. US auto manufacturers' stocks have been performing poorly this week. Tesla's stock price fell 12.3% on Wednesday as its second-quarter profits fell short of Wall Street's expectations, with falling car prices and competitive pressures continuing to impact its performance."

However, the company's overall operating profit still fell short of expectations.

However, investors hope to see quarterly performance that exceeds expectations and raises expectations. On Tuesday, General Motors announced better-than-expected second-quarter results and raised its full-year operating profit guidance from $12.5 billion to $14.5 billion to $13 billion to $15 billion.

However, this did not help General Motors' stock price, which fell more than 6% on the day. US auto manufacturers' stocks have been performing poorly this week. Tesla's stock price fell 12.3% on Wednesday as its second-quarter profits fell short of Wall Street's expectations, with falling car prices and competitive pressures continuing to impact its performance.