Raphael Stevens

The auto industry has experienced declining sales growth in 2022. The semiconductor chip shortage, a key component in building many modern-day vehicles, is still a major challenge preventing the industry from scaling production to meet demand. Club holding Ford Motor (F) has no doubt been impacted. However, the automaker is still seeing gains and outperforming the industry in sales. Here’s what you need to know ahead of the company’s results, which come out after the closing bell Wednesday. Ford is a longer-term play EV battery capacity How the competition lines up Bottom line Ford is a longer-term play A hurdle the auto industry has been facing is higher new car prices due to low car inventory, driven by the chip shortage. But as pent-up consumer demand for new vehicles continues over the next few years, Ford is one of the best-positioned automakers because it is the biggest commercial consumer. In June, while overall auto industry sales were down 11%, Ford sales in were up 31.5% compared to a year ago, outperforming its peers despite the chip shortage and supply constraints. Ford’s electric vehicle sales were up 77% in June compared to a year ago, helped by its F-150 Lightning being America’s best-selling electric truck in the month. Ford delivered $34.5 billion in revenue in the first quarter , which was $3.1 billion less than the year before but still beat earnings expectations. If it wasn’t for supply chain issues, that number could have been higher given Ford’s strong demand for its new line-up of cars. A good problem that Ford has is high demand outpacing resources available to scale its production. Despite the chip shortage, Ford will still be producing cars, and its business remains strong because of limited inventory. Most importantly, Ford is a financially sound company. It has strong total company cash of $23.6 billion and liquidity of $44.6 billion, according to the company’s first-quarter earnings release . Ford also maintained its full-year positive outlook on profitability. EV battery capacity Ford has also been making great strides to electrify its fleet as high demand for EVs persists. In its EV battery capacity plan update last week, Ford announced that it has secured 100% of the annual battery cell capacity needed to support its goal of selling 600,000 EVs annually on a global scale by late 2023. A highlight from the plan was Ford’s addition of lithium iron phosphate battery chemistry to its portfolio, which will allow the automaker to build more units required for EVs as well as reduce the reliance on other scarce minerals such as nickel. This new chemistry will also allow Ford to save 10% to 15% on its bill compared to the nickel-based batteries. How the competition lines up Ford competitor General Motors (GM) on Tuesday morning delivered mixed second-quarter results, with better-than-expected revenue of $35.76 billion, up nearly 5% increase over last year, and lower-than-expected adjusted earnings of $1.14 per share. That numbers highlight the pressures of protecting profit margins as material costs rise in price. Top auto industry leaders are racing to be the leader in EVs. GM aims to achieve an all-electric future and overtake Tesla (TSLA) and Ford. However, it fell short in delivering about 100,000 vehicles by the end of the quarter, while Tesla delivered more than 254,000 vehicles during the same period. When Ford’s numbers are out later in the afternoon, we’ll be looking at whether the company has kept up its sales momentum and EV production and how it fared overall in this challenging economic environment. Bottom line The Club invests in Ford because the automaker is working on aggressively cutting costs, refocusing its business on profitable regions and quickly progressing in its efforts to electrify its fleet. In June, CEO Jim Farley told us that the company is closing its Ford Focus plant in Germany because it was losing money but plans to keep open a second German plant that’s profitable. Ford also decisively restructured its South American operations in January 2021, which included shutting down a manufacturing plant in Brazil, allowing the company to increase its operational efficiency. The restructuring resulted in three consecutive quarters of profitability. These actions have helped Ford improved its profitability, which can help the automaker weather headwinds many other companies are facing this earnings season like higher input costs. Ford shares are down about 38% for the year, but this is not a reason to sell. The stock’s drop alludes to recession fears in the U.S. economy, Ford’s main market, and the rising prices of batteries. But while the macroeconomic backdrop is difficult, Ford’s management team appears to be executing on factors it can control. The stock’s correction is one of the reasons why Nomura upgraded Ford to neutral from reduce (hold from sell), seeing Ford shares as no longer overvalued. The Club has a 2 rating on Ford, which means we’d like to see a pullback before buying more. The stock is trading at less than 7 times earnings, nearly half the valuation it came into the year with. This indicates that despite earnings estimates coming down a bit throughout the year, as economic concerns increased, the stock has become significantly cheaper as it moved lower. Remember, a stock can move lower, but if the valuation doesn’t move lower as well, the stock isn’t becoming a better value. Ford also pays a slightly greater than 3% dividend, which has us patient and willing to ride out the drop. (Jim Cramer’s Charitable Trust is long F. See here for a full list of the stocks.) Correction: This story has been updated to clarify Ford’s first-quarter cash and liquidity numbers. As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Traders work on the floor of the New York Stock Exchange (NYSE) on April 28, 2022 in New York City.
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Boeing disclosed a charge of $93 million in the second quarter from its Starliner astronaut capsule program.
The latest Starliner-related charge means the company has absorbed $688 million in costs from delays and additional work on the capsule to date.
Boeing was once seen as evenly matched with SpaceX in the race to launch NASA astronauts, but fell behind due to development setbacks.

Boeing’s Starliner spacecraft is seen before docking with the International Space Station on May 20, 2022 during the uncrewed OFT-2 mission.

Boeing disclosed a charge of $93 million in the second quarter from its Starliner astronaut capsule program, bringing the program’s overrun costs to nearly $700 million.
The aerospace giant said the latest charge was “primarily driven by launch manifest updates and additional costs associated with OFT-2,” or Orbital Flight Test 2. The second uncrewed flight of Starliner successfully completed a six-day long mission in May, reaching a critical test objective – docking with the International Space Station – as Boeing prepares for the capsule to carry astronauts.

Boeing’s latest Starliner-related charge means the company has absorbed $688 million in costs from delays and additional work on the capsule to date.

The company has been developing its Starliner spacecraft under NASA’s Commercial Crew program, having won nearly $5 billion in contracts to build the capsule. Boeing’s program competes with Elon Musk’s SpaceX, which finished development of its Crew Dragon spacecraft and is now on its fourth operational human spaceflight for NASA.
Boeing was once seen as evenly matched with SpaceX in the race to launch NASA astronauts, but fell behind due to development setbacks.
The next Starliner mission is expected to be the Crew Flight Test, or CFT, flying the first astronauts onboard the capsule. However, Boeing is examining whether to redesign the Aerojet Rocketdyne-made propulsion valves on Starliner, which malfunctioned during the company’s first attempt to launch the OFT-2 mission in August 2021.

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Boeing and Airbus customers are enjoying a rebound in air travel.
Supply chain and labor constraints are headwinds for both manufacturers.
Boeing delivered 121 aircraft in the quarter, most of them 737s, and said it’s in “final stages” of resuming Dreamliner deliveries.

An aerial view of Boeing 777X and Boeing 737 MAX 10 airplanes parked at King County International Airport-Boeing Field, in Seattle, Washington, June 1, 2022.
Lindsey Wasson | Reuters

Boeing on Wednesday stuck by its forecast to return to free cash flow in this year as it prepares to resume deliveries of its 787 Dreamliner planes after manufacturing flaws paused deliveries for much of the past two years.
The company’s second quarter results fell short of analysts estimates. Weakness in its defense unit dragged down results, but was partly offset by strength in its commercial airplane unit. Aircraft deliveries rose to 121 in the second quarter from 79 a year ago, while commercial aircraft revenue rose 3% to more than $6.2 billion.

The company is fresh from winning high-profile orders at the Farnborough Air Show like those for 100 737 Max 10s from Delta Air Lines. Boeing and rival Airbus’ customers have been benefitting from a rebound in travel after demand for flights slumped during the pandemic.
Here’s how the company performed compared with analysts’ estimates complied by Refinitiv:

Adjusted loss per share: 37 cents vs an expected loss 14 cents.
Revenue: $16.68 billion vs. $17.57 billion expected.

Boeing swung to operating cash flow of $81 million in the quarter after burning $483 million in the same period last year. The Arlington, Virginia-based company posted net income of $160 million, down 72% from a year ago on revenue of $16.68 billion, which was down 2% from the second quarter of 2021.
CEO Dave Calhoun earlier this month said that the company is producing an average of 31 737 Max jetliners each month. He said the company won’t raise production too quickly because of supply chain and labor constraints. Rival Airbus has expressed similar concerns.
“Even with demand high, we won’t chase production rates or push our system too fast,” Calhoun said in a staff note on Wednesday. “With safety and quality at the forefront, we will prioritize stability and predictability.”

He also reiterated that Boeing is “in the final stages” of preparations to resume deliveries of its 787 Dreamliners, which have been paused for more than a year because of production flaws.
In January, Boeing said the issues would cost it $5.5 billion, including $2 billion in irregular manufacturing costs as it dialed back production to avoid a pileup of inventory. Boeing recorded $283 million of that in the second quarter.
A return of 787 deliveries is key for Boeing because customers pay the bulk of an aircraft’s price when they receive the planes.
The company’s defense unit revenue dropped 10% from a year ago and the company took a $147 million charge on its MQ-25 unmanned refueler because of higher costs.
Boeing executives will discuss results with analysts at 10:30 a.m. Wednesday, when they are likely to face questions about the 737 Max’s return to flying in key aircraft customer China, timing on the 777X and its cash flow forecast for this and next year.
Analysts are also likely to ask Boeing’s leaders to outline when they expect to win U.S. certification of the 737 Max 10, the largest in the Max family.
Boeing shares are down more than 22% so far this year. Shares were up more than 3% in premarket trading after releasing results.

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McDonald’s hiked the price of its cheeseburger in the U.K. for the first time in 14 years as cost pressures bite.
The cost of a cheeseburger has increased from 99 pence ($1.19) to £1.19, marking a 20% price increase.
Other items on McDonald’s U.K. food menu have increased in price by 10p to 20p, including its McNugget share boxes, breakfast meals and meal upgrades.

McDonald’s has raised the price of its cheeseburgers in the U.K. for the first time in 14 years.
Justin Sullivan | Getty Images News | Getty Images

McDonald’s hiked the price of its cheeseburger in the U.K. for the first time in 14 years as cost pressures bite.
The fast food chain confirmed Wednesday that the iconic burger was one among a number of items facing price increases across its U.K. restaurant network.  

The cost of a cheeseburger has increased 20% from 99 pence ($1.19) to £1.19.
The last time McDonald’s raised the price of its cheeseburger in Britain was in the wake of the 2008 global financial crisis.
Other items on McDonald’s U.K. food menu have increased in price by between 10p and 20p, including its McNugget share boxes, breakfast meals and upgrades from medium to large meals.
McDonald’s said that some items will remain unaffected by price hikes. Meanwhile, prices will continue to vary across franchisee-owned restaurants, who can set prices based on recommendations from McDonald’s.

‘Tough choices’

In a statement to customers, the McDonald’s U.K. & Ireland CEO, Alistair Macrow, said that rising inflationary pressures had forced the company to make some “tough choices” over pricing.

“Today’s pressures mean, like many, we are having to make some tough choices about our prices,” Macrow said.
“Just like you, our company, our franchisees who own and operate our restaurants, and our suppliers are all feeling the impact of rising inflation,” he added.
The hikes come as companies are up against increased costs for items like fuel, wages and ingredients as inflation continues to spiral. In the U.K., inflation hit a new peak of 9.4% in June, its highest level in 40 years.
Macrow said the business had delayed price hikes for as long as possible, but that it was no longer possible to absorb rising costs within the business.
“We understand that any price increases are not good news, but we have delayed and minimized these changes for as long as we could,” he said.
It comes a day after McDonald’s reported a jump in global sales of 9.7% for the three months to the end of June, versus the same period last year.
McDonald’s, which runs more than 36,000 restaurants in more than 100 countries, has already implemented a number of price hikes across its U.S. restaurant network since last year.

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