Ford (F) Last Update 7/29/22
Related: DDAIF HMC GM TM
% of Stock Price
Revenue
Gross Profits
Free Cash Flow
Ford
$18.81
Yours
Trefis Price
N/A
$15.44
Market
 
Top Drivers for Period
Key Drivers
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TREFIS Analysis


Trefis Report
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RECENT NEWS AND ANALYSIS

Potential upside & downside to trefis price

Ford Company

VALUATION HIGHLIGHTS

  1. Ford North America constitutes 40% of the Trefis price estimate for Ford's stock.
  2. Vehicle Lease & Loans constitute 15% of the Trefis price estimate for Ford's stock.
  3. Ford Europe constitutes 12% of the Trefis price estimate for Ford's stock.

WHAT HAS CHANGED?

  1. Latest Earnings

Ford posted a mixed set of Q1 2022 results, weighed down by supply chain issues and rising inflation. While revenue declined 5% year-over-year to $34.5 billion, adjusted operating profits fell 40% to $2.9 billion. Adjusted EPS stood at $0.38, down from $0.70 in Q1 2021. While wholesale shipments declined by about 9% year-over-year to 970,000 units, Ford has indicated that it expects the trend to reverse, guiding full-year wholesale volume growth of 10% to 15%.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Ford's value that present opportunities for upside or downside to the current Trefis price estimate for Ford:

  • Average Price Of Ford's Vehicles In North America: We expect steady growth in the average price of Ford's vehicles in North America as the consumer preferences shift towards the higher-end crossovers and SUVs - a favorable product mix is likely to drive average prices higher. There can be a 5% upside or downside to our price estimate if the average price moves at an accelerated pace - upward or downward.

  • Ford's Vehicles Sold In North America: We expect a steady rise post Covid fall in Ford's vehicles sold in North America over our forecast period. However, since this is Ford's biggest division, a substantial change in this metric can drive the company's price estimate.

BUSINESS SUMMARY

Ford Motor Company is a global automotive company headquartered in Dearborn, Michigan, USA. It manufactures and distributes automobiles across six continents. It is currently the fourth-largest automaker in the world, based on the number of vehicles sold annually. The company’s automotive brands include Ford and Lincoln. The company provides financial services, such as vehicle leases and loans, through the Ford Motor Credit Company.

SOURCES OF VALUE

F-Series Pick Up Trucks

Ford generates its maximum revenues from pick-up trucks sold in North America. The company commands a nearly 18% market share in the North American trucks segment, and this share is expected to grow steadily in the future.

Lincoln Cars

Ford's luxury cars are doing well in China, and this segment holds strong growth potential for the company

KEY TRENDS

China and Europe to help growth

The company believes China will be double the US market by the year 2025, and thus it is a critical geography for the company. The company is refreshing its product line and has broken off China as a separate business unit, so it receives proper focus. Europe is under restructuring, and the company expects to be the leading market share in the light commercial vehicle segment. For passenger cars, the company is trimming lineup for a better margin mix.

'One Ford' vision to keep costs under check

Ford has historically maintained a heavy focus in North America, claiming that higher-income U.S. consumers buy more often and tend to buy upscale. However, North America's once significant lead in international unit sales has all but disappeared, and more importantly, growth in car sales in the BRIC countries continues to grow quickly.

How Ford manages to take advantage of this trend will be decisive to the company's long-term growth. As discussed above, Ford's current international plan is the "One Ford" campaign, which seeks to save production and design costs by producing a single fleet of vehicles for all markets worldwide. The first fruit of this scheme was the new Ford Fiesta, which was developed by Ford Europe but was sold in all Ford's major markets, and Europe's iconic Ford Transit van, which was introduced in Asia and the U.S. in 2009.

We believe this will lead to:

  1. Better advertising, marketing, and communications programs to launch Ford cars globally in all markets.
  2. Accelerate the development of new products under the “Ford” brand.
  3. Aggressively restructuring the balance sheet by selling other brands and using these proceeds for the “Ford Brand.” Ford has sold Jaguar, Aston Martin, Saab, Land Rover, and Volvo within 3-4 years.
  4. Standardization of processes and reducing costs.
  5. Reducing the production cycle time for Ford cars and bringing the time closer to its Japanese rivals.

This trend is important as the stock price is sensitive to the following drivers:

  • Automotive division gross margins
  • Vehicle lease and loans EBITDA margins
  • SG&A as a percentage of revenue.

As political pressure mounts for a greener economy, the future of Ford's main sales are centered on fuel-efficient vehicles.

Traditionally, Ford's most profitable vehicles have been large SUVs and pickup trucks. However, volatile oil prices and political pressures for more fuel-efficient cars have taken a toll on the market for larger vehicles.

Ford plans to produce more fuel-efficient cars, changing both its North American manufacturing plants and its line-up of vehicles available in the U.S. In terms of North American manufacturing, the company plans to convert three existing trucks, and sports utility vehicle (SUV) plants for small car production. This offers the advantage of quickly bringing high demand, fuel-efficient cars to the U.S. market, without having to invest money and time to create an entirely new automobile. In terms of product mix, it plans to call for more crossover SUVs, compact cars, and hybrid vehicles.

This trend is likely to affect the market shares for the automotive division in North America and international markets.

Restructuring, consolidation, and other trends:

  1. Strengthening the U.S. supply base
  2. Supporting the dealer network
  3. Reducing salaried personnel costs
  4. Investing in fuel economy and advanced technologies
  5. Accelerate electrification including next-generation hybrids and all-electric vehicles.