Ford's Hybrid Pivot: When Missing Guidance Could Be Good News

Why it matters: 

Ford's latest earnings report offers a stark reality check on the auto industry's transformation, highlighting the growing pains of legacy automakers trying to thread the needle between profitable traditional vehicles and money-losing EVs.

The big picture: 

Ford is trimming its 2024 profit forecast to $10 billion from a previous range of $10-12 billion, even as it beat Wall Street's Q3 expectations. The company's traditional business remains robust, but rising costs and EV investments are eating into margins.

Traditional vehicles and fleet sales are carrying the load:

• Ford Pro (commercial) and Ford Blue (traditional vehicles) units raked in $3.44 billion combined

• Meanwhile, the Model e EV division hemorrhaged $1.22 billion this quarter

• Company's hybrid strategy emerges as a potential bright spot amid slowing pure EV demand

Go deeper:

• Quality concerns continue haunting Ford, with warranty costs still elevated despite recent improvements

• Supply chain issues persist, with Hurricane Helene's impact likely to ripple into future quarters

• China operations surprisingly contributed $600+ million to earnings, bucking the trend of struggling Western automakers in the region

What they're saying: 

"Our focus continues on cost and quality, which are holding back our progress and represent tremendous upside potential," says Ford CFO John Lawler, hinting at untapped efficiency opportunities.

The bottom line: 

While Wall Street frets over Ford's 91-day inventory levels and EV unit losses, savvy investors might spot an opportunity. The company's pivot to hybrids, strong commercial business, and China success suggest Ford isn't just surviving the auto industry's transformation – it's pragmatically adapting.

Smart play: 

Consider the stock's 6% after-hours dip as a potential entry point if you believe in the company's hybrid-focused strategy and commercial strength. $(F) trades at modest multiples compared to pure EV players, offering a blend of traditional auto stability with electric upside.