What GM, Ford investors should know ahead of third-quarter earnings

DETROIT – General Motors and Ford Motor are expected to report relatively solid third-quarter earnings Wednesday despite an ongoing global disruption of supply chains, including a shortage of semiconductor chips that have depleted vehicle inventories but boosted profits this year.

The Detroit automakers have managed as well as they can during the disruptions, allowing them to raise their earnings expectations for the year on record vehicle pricing and profits amid surprisingly resilient consumer demand. That’s trend is expected to continue, as the automotive industry rebuilds inventory as more production comes back online in the coming weeks and quarters, according to analysts.

“Not only should both benefit from favorable fundamentals amid an up cycle environment, but both have a significant opportunity ahead to improve perception on their long-term positioning in an EV/AV world,” Credit Suisse analyst Dan Levy said in an investor note last week.

JPMorgan analyst Ryan Brinkman last week raised estimates to forecast a large beat in the case of GM and by increasing Ford estimates to more modestly above consensus from in line. However, he noted that Ford’s performance was expected to increase during the quarter, while GM’s was expected to have declined.

Here’s what Wall Street analysts expect from each automaker’s third-quarter earnings as well as other things investors should know about before GM reports ahead of the market opening Wednesday, followed by Ford after the markets close.

GM previously warned investors that its North American wholesale volumes would be down by about 200,000 units in the second half of 2021 compared with the first half. It has continued to maintain its financial guidance for the year, including adjusted earnings of between $11.5 billion and $13.5 billion, or $5.40 to $6.40 a share. It earned about $6.2 billion, or $4.21 a share, during the first six months of the year.

GM said it expects to take a hit of between $3.5 billion to $4.5 billion during the second half of the year, due to a $1.5 billion to $2 billion rise in commodity costs and lower earnings from its financial arm.

In July, Ford raised its guidance for the year, but it told investors the second half of the year would be weaker than the first regarding its operating profit, which was at $5.9 billion through June. At that time, the company raised its guidance for full-year adjusted earnings…