Ford craters 13% after it says supply-chain inflation will ding profits by $1 billion

• Ford stock fell as much as 13% on Tuesday, suffering its worst one-day decline in 11 years.
• The decline came after the automaker warned investors that rising supply chain costs would hurt profits.
• Ford is the latest company to issue a profit warning following Fed-Ex's announcement last week.

Ford stock plunged as much as 13% on Tuesday after the company issued a $1 billion profit warning to investors for its current quarter.

Specifically, Ford said an inflation-related jump in supplier costs are running $1 billion higher than the company anticipated. Additionally, Ford said it expects adjusted earnings before interest and taxes to be between $1.4 billion and $1.7 billion, which is less than half its second-quarter result of $3.7 billion.

The company also said supply-chain logjams mean the company will have as many as 45,000 vehicles in inventory and unable to reach its dealers at the end of the third-quarter, as certain parts remain hard to secure. Despite the supply-chain related problems, Ford reiterated its full-year adjusted EBIT guidance of $11.5 billion to $12.5 billion.

But that could change when the company reports its third-quarter earnings results next month. "The company intends to announce full third-quarter 2022 financial results – and provide more dimension about expectations for full-year performance – on Wednesday, Oct. 26," Ford said.

JPMorgan analyst Ryan Brinkman thinks the inflation issues could extend into 2023 and impact Ford's earnings results, according to a Monday note.

"Higher inflation-related supplier costs seem to have a higher chance of recurring in comparison to chip shortages, suggesting some impact to 2023 also, for which we lower EBIT to $12.2 billion from $12.7 billion," Brinkman said.

Tuesday's decline wiped off $7 billion in market value and represented Ford's worst day in 11 years, according to data from FactSet.

The profit warning from Ford follows a similar warning from Fed-Ex last week, as the company said a global slow-down in demand for goods has significantly hurt its ability to reach its prior financial forecasts which were made just a couple months ago.

The profit warnings from Fed-Ex and Ford could be the start of an earnings slowdown that ultimately leads to an economic recession, just as the Federal Reserve's aggressive interest rate hikes begin to be felt in the broader economy. Fed Chairman Jerome Powell is expected to raise interest rates by another 75 basis points tomorrow.