Category: F

Its time to buy stock in Ford Motor
F
.

That’s the verdict of Adam Johnson, author of the Bullseye Brief financial newsletter.

“My target of $23 would represent a doubling from current prices and is quite achievable,” he writes in a recent edition of report.

The stock recently fetched $11.35.

Johnson lists multiple reasons for buying including the company’s strength in the electric vehicle (EV) market with the goal of being the top American producer by 2026 . He writes as follows:

• “Ford highlighted numerous catalysts at last week’s Analyst Day, an event aimed at attracting the institutional support need to propel the stock to new highs. Electric vehicles were showcased as a way to boost sales, expand margins and increase share. Like all auto makers, Ford’s ambitious plans impact all aspects of the company, from supply chains to software, connectivity to sales.”

But perhaps even more important, Johnson doesn’t forecast a recession over the next two or three years. That makes sense as inflation is cooling and hence the Federal Reserve will not increase interest rates much more. (Also despite false reports of an imminent recession for nearly a year the economy remains robust.)

The auto business is cyclical and highly sensitive to moves in the cost of borrowing money and the unemployment rate. But with the economy looking strong and the Fed likely to back off its war on inflation, it makes sense to bet on continued growth for the automaker, especially one likely to gain share in the EV segment.

Johnson assumes total auto sales lift from a recent 17.5 million a year to 18 million based on unfilled demand and a growth in the overall population. Plus he sees the company gaining a 15% EV market share up from 14%.

Along with some cost savings from producing more EVs and increased share, Ford’s profits should grow and help lift the stock price, according to Johnson’s analysis.

Of course it doesn’t hurt that the stock yields almost 5% as well.

An unprecedented and completely unthinkable thing just happened. Tesla, Inc. (TSLA) CEO Elon Musk has agreed to let Ford Motor Company (NYSE:F) begin to utilize Tesla’s vast electric vehicle (“EV”) Supercharger network. I don’t think I’ve ever seen this level of generosity between competitors in my lifetime. According to Seeking Alpha News:

“Ford Motor Company (F) announced that it struck a deal with Tesla (TSLA) to gain access for its customers to more than 12K Tesla Superchargers across the U.S. and Canada. The arrangement will double the number of fast-chargers available to Ford electric vehicle customers starting Spring 2024.

A Tesla-developed adapter will provide Ford F-150 Lightning, Mustang Mach-E and E-Transit vehicles fitted with the Combined Charging System port access to Tesla’s V3 Superchargers. Notably, Ford (F) said it will start equipping future electric vehicles with the NACS charge port in 2025 to remove the need for an adapter for direct access to Tesla Superchargers.

“The Tesla Supercharger network has excellent reliability and the NACS plug is smaller and lighter. Overall, this provides a superior experience for customers,” noted a Ford exec Marin Gjaja.

Earlier in the year, the White House announced that Tesla (TSLA) would be opening up parts of its Supercharger network to other auto manufacturers.

In addition to the Tesla (TSLA) arrangement, Ford dealers (F) are adding about 1.8K public-facing fast-chargers and locations to the BlueOval Charge Network by early 2024.”

Yes, it is true. Tesla had already agreed to open up parts of its supercharger network to other automakers earlier in the year. Yet, this was something special. Tesla CEO Elon Musk and Ford CEO Farley actually had a Twitter Spaces event yesterday to announce the partnership. I must say, it was very interesting. The following are my takeaways from the Twitter Space event.

Top Three Musk/Farley Space event Takeaways

This is going to be huge for Ford

Ford CEO Farley could not stop thanking Elon for making this gesture. Farley stated explicitly that this was going to be a huge problem solver for Ford’s next generation EV products, referred to as “Gen 2” by Ford. Ford plans to have an updated version of the Ford F150 Lightning and a 3 row 7-seat passenger vehicle Farley referred to as a “bullet train” equipped with the NACS Tesla supercharger plug. Tesla’s NACS supercharger plug has “Excellent reliability, is smaller and lighter, and provides a superior experience for customers,” noted a Ford exec Marin Gjaja.

Furthermore, this solves Ford’s electrification issue in a turnkey manner. Farley said more than once what a hard time Ford was having solving the issue. Farley had high praise for Elon. Farley stroked Musk’s ego like a seasoned pro – and Elon was eating it up, I might add. One of my title choices was going to be “Ford: Farley Charmed the Plugs Off Of Elon.” Ha! That leads me to my next point, Elon really likes Farley and Ford. Here is why.

Musk has a soft spot for Farley and Ford

Musk had stated in previous interviews that he has a special respect and affinity for Ford. This is due to the fact Ford did not accept a bailout in 2009 by the government, like General Motors Company (GM) and Chrysler did. If you didn’t know by now, Elon has a conservative, independent bent to him. That’s why he built his new facilities in Texas where there is less government interference than California.

As far as Farley goes, you could tell Elon was eating up all the high praise Farley was dishing out. It’s a match made in heaven, I thought to myself. You could tell by the back and forth that the two men had a great affection and respect for each other. That leads me to my final and most important takeaway, this is only the beginning.

Only the tip of the iceberg

During the Twitter Space event, Farley mentioned how hard it was getting the electrification software to work efficiently and properly. This prompted Elon to agree. Then Musk stated that Tesla had many of the same issues as they worked through the process as well. Then, Musk stated he would work with his software team to see about “open-sourcing” the code so that Ford could use it. I thought that was incredible.

Musk didn’t stop there, either. Farley mentioned the challenges of refining the lithium raw materials for the batteries and asked how it was going at Tesla’s Corpus Christi plant. Musk then said they were definitely working through issues and would partner up on solving those issues as well.

I got a “big brother” type vibe from Musk towards Farley. You could tell he genuinely wants Ford and Farley to succeed. I walked away, thinking Musk might even offer to buy Ford out. Which brings me to another major point. Ford’s “gen 2” EV line up may mesh well with Tesla’s EV line up.

Ford’s next generation EV lineup meshes well with Tesla’s lineup

Ford’s next generation EV lineup is extremely focused. They do not want to complete in the “2 row” 5 seat sedan segment, which is Tesla’s forte. Ford’s next generation vehicles will be in the truck and SUV segment. I see this as complementing well with Tesla’s vehicles offerings. What’s more, Ford has a huge segment of the business vehicle market now, which they refer to as Ford Pro. The electrification of the trucks and vans used by businesses will be a big part of Ford’s EV push. I can see Musk eyeing this as another jewel he wouldn’t mind adding to his crown. Now let me wrap this piece up.

The Wrap-Up

I see Ford Motor Company teaming up with Tesla, Inc. as a match made in heaven. Tesla will definitely benefit from the relationship. Nevertheless, Ford has basically won the “proverbial” lottery, so to speak. Having access to Tesla’s Supercharger network, solving the plug and electrification riddle in one fell swoop, having access to the Tesla’s lessons learned knowledge base as well as the source code, is incalculable if you ask me.

I see a very long and prosperous partnership between Ford and Tesla, Inc. blooming before my very eyes. I actually just doubled my Ford Motor Company stock position. The icing on the cake is the fact Ford pays a dividend, which currently yields 5%.

Seeking Alpha Ford Dividend Summary

So you get paid to watch Ford flourish into an EV power house over the next several years. Not a bad deal.

I was asked by Seeking Alpha to give my thoughts on Ford’s recent Market Day presentation, where they detailed their future plans for the company as well. You can listen to it here. I walked away from the presentation with my bullishness bolstered. I was planning on doubling my position after that already. The breaking news that Ford Motor Company is teaming up with Tesla, Inc. was just the cherry on top for me.

Those are my thoughts on the matter, I look forward to reading yours. Hope everyone has a great Memorial Day weekend!

Ford Motor Company (F Quick QuoteF – Free Report) announces a deal to add Tesla (TSLA Quick QuoteTSLA – Free Report) plugs to its current and future electric vehicles. Per the agreement, Ford users will get access to over 12,000 Tesla Superchargers across the United States and Canada starting early next year. Ford’s existing owners will be able to charge their electric vehicles at Tesla Superchargers using an adapter, whereas its next-generation EV owners will not need an adapter to charge their vehicles at Superchargers.

Elon Musk, CEO Tesla and Jim Farley, CEO Ford, announced the deal during a live audio session on Twitter Spaces. Farley mentioned that Ford is committed to using a single U.S. charging protocol that includes Tesla’s charger port, called the North American Charging Standard (“NACS”). Ford currently uses the CCS standard plug in its vehicle but it is unclear if it will continue to maintain the same plug in its next-generation EVs.

Tesla currently operates around 45,000 Superchargers with more than 5,000 stations across the globe. On average, there are nine Superchargers per station.

Ford is currently focused on its Ford+ plan to establish itself in the era of electric and connected vehicles. The company remains on track to reach an annualized EV production capacity of 600,000 units globally by the end of this year.

The firm’s aggressive EV push, with planned spending of around $50 billion by 2026 and target production of more than 2 million EVs by 2026-end (witnessing a 49% CAGR over the span of 2023-2026), augurs well for long-term growth. By 2030, Ford expects EVs to account for 50% of its global sales, which will cement its position in the red-hot EV landscape.

While Ford’s massive investments in green vehicles and self-driving cars will prove beneficial in the long term, it is likely to strain its near-term financials. Ford’s massive spending on modernization, including connectivity, IT and new product launches, is expected to limit cash flows.

Zacks Rank & Key Picks

F currently sports a Zacks Rank #1 (Strong Buy), while TSLA carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Other top-ranked players in the auto space are Mercedes-Benz Group AG (MBGAF Quick QuoteMBGAF – Free Report) and Wabash National (WNC Quick QuoteWNC – Free Report) , both of which carry the same rank as Ford.

Mercedes-Benz develops, manufactures and sells passenger cars, including premium and luxury vehicles. The Zacks Consensus Estimate for MBGAF’s 2023 sales implies year-over-year growth of 6%.

Wabash is one of the leading manufacturers of semi-trailers in North America. The Zacks Consensus Estimate for WNC’s 2023 sales and earnings indicates year-over-year growth of 12% and 19.7%, respectively.

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the “Value” category. When paired with a high Zacks Rank, “A” grades in the Value category are among the strongest value stocks on the market today.

One company to watch right now is Ford Motor (F Quick QuoteF – Free Report) . F is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value.

Investors should also note that F holds a PEG ratio of 1.08. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock’s expected earnings growth rate. F’s industry currently sports an average PEG of 2.17. Within the past year, F’s PEG has been as high as 2.58 and as low as 0.66, with a median of 1.54.

Finally, our model also underscores that F has a P/CF ratio of 4.83. This figure highlights a company’s operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This company’s current P/CF looks solid when compared to its industry’s average P/CF of 15.85. Over the past 52 weeks, F’s P/CF has been as high as 12.84 and as low as 2.51, with a median of 3.56.

These are just a handful of the figures considered in Ford Motor’s great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that F is an impressive value stock right now.

Shares of Albermarle Corp.
ALB,
-2.85%
rallied 1.4% in premarket trading Monday, after the specialty chemicals company announced a 5-year agreement to supply more than 100,000 tons of battery-grade lithium hydroxide to Ford Motor Co.
F,
+0.09%,
that will be used to make about 3 million electric-vehicle (EV) batteries. Albermarle said the 5-year agreement starts in 2026. Financial terms of the agreement were not disclosed. The announcement comes after Ford said it will announce at its capital markets day, which kicks off at 8 a.m. Eastern, new agreements for EV battery raw materials. “With the growing demand for EVs in the United States, our customers are seeking to regionalize their supply chain for greater security, sustainability and lower costs,” said Eric Norris, president of Albemarle Energy Storage. “This agreement exemplifies the industry collaborations and investments required.” Albermarle’s stock has lost 5.9% year to date through Friday, while the S&P 500
SPX,
-0.14%
has gained 9.2%. Separately, EnergySource Materials (ESM) also announced a lithium supply contract with Ford.

One of


Ford


‘s weapons in the battle to transition to electric vehicles, and gain market share in the process, might surprise investors. It’s the


Ford Motor


balance sheet.

If you were asked how much money Ford Motor Company (F -1.69%) makes on each electric vehicle (EV) it manufactures, what would you guess?

If you channeled your inner Price Is Right contestant and said $1 dollar, you’d have over bet by about $66,000.

That’s right, Ford — like most manufacturers not named Tesla — is losing a staggering amount on each EV sold. So how do the folks at the Blue Oval turn a profit on its EV program by 2026? Let’s dig in.

By the numbers

To be clear, this exercise is using simple numbers to get a basic grasp of how unprofitable Ford’s Model e EV program is — which is to be expected at this point in development.

Ford’s EV sales grew a sizable 41% during the first quarter to 10,866 EVs, and its Model e segment lost $722 million in adjusted earnings before interest and taxes (EBIT) during that same time frame. That essentially shows each vehicle that Ford’s EV segment produces loses more than $66,000.

It’s also fair to note that Ford’s EV profitability is expected to get worse before it begins turning a profit in 2026. In fact, Ford Model e losses jumped from roughly $900 million in 2021 to $2.1 billion in 2022. Those losses are expected to reach $3 billion in 2023 as the company heavily invests in new models and factories to build scale and eventually turn billions in losses into billions in profits.

The question now is: How does Ford actually get to profitability in just a few short years?

Let’s take a walk

The key factors for Ford’s Model e turning a profit are ramping up scale, improving design and engineering efficiencies, lowering battery cost, and crossing its fingers there are no EV price wars and that raw material costs improve.

More specifically, the biggest factor is Ford accelerating scale. Per Ford’s “Teach-In” presentation, the Model e segment is operating at roughly (40%) margin, half of which can be erased by its expected ramp up in production and scale.

Already Ford has targeted its popular F-150 Lightning and Mustang Mach-E to reach annual run rates of 150,000 units and 210,000 units, respectively, by the end of 2023. Ford is targeting a global run rate of 600,000 EVs by the end of this year, with that figure reaching more than 2 million by the end of 2026.

Another 15% of margin points can be gained through maximizing commonality and reuse of technology and engineering, and improving design efficiency. Another 10 points of margin can be found by simply vertically integrating, securing battery materials through 2026 and beyond, and accelerating scale of battery production.

Those three factors should alone, per projections, get the Model e segment to profitability, as you can see below.

Image source: Ford Motor Company March, 2023 “Teach-In” presentation.

The remaining margin points to reach its 8% target by the end of 2026 might be a little more uncertain. Ford expects dealer standards, software and service, and better raw materials costs to add a few extra margin points while anticipating competitive pricing to offset some of those gains.

Is profitability in 2026 reasonable?

In short: yes, Ford can generate profits from its EV program by the end of 2026. It has the popular nameplates driving current sales and demand, new EVs on the way, and improving scale for not only its vehicles, but also its batteries.

In a short time Wall Street has moved from asking automakers to have a big EV strategy to demanding big EV profits — but it’s reasonable for almost all automakers to be a couple of years out from that goal. Losing over $66,000 on each EV is a big number, and savvy investors should keep an eye on this critical Ford segment going forward as it’s an integral part of Ford’s long-term investment thesis.

Ford Motor Company (F Quick QuoteF – Free Report) came out with quarterly earnings of $0.63 per share, beating the Zacks Consensus Estimate of $0.40 per share. This compares to earnings of $0.38 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 57.50%. A quarter ago, it was expected that this company would post earnings of $0.60 per share when it actually produced earnings of $0.51, delivering a surprise of -15%.

Over the last four quarters, the company has surpassed consensus EPS estimates two times.

Ford Motor Company, which belongs to the Zacks Automotive – Domestic industry, posted revenues of $39.09 billion for the quarter ended March 2023, surpassing the Zacks Consensus Estimate by 6.22%. This compares to year-ago revenues of $32.11 billion. The company has topped consensus revenue estimates three times over the last four quarters.

The sustainability of the stock’s immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management’s commentary on the earnings call.

Ford Motor Company shares have added about 3.7% since the beginning of the year versus the S&P 500’s gain of 8.6%.

What’s Next for Ford Motor Company?

While Ford Motor Company has underperformed the market so far this year, the question that comes to investors’ minds is: what’s next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company’s earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Ford Motor Company: mixed. While the magnitude and direction of estimate revisions could change following the company’s just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $0.45 on $36.79 billion in revenues for the coming quarter and $1.53 on $152.4 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Automotive – Domestic is currently in the top 43% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Another stock from the same industry, Lightning eMotors, Inc. (ZEV Quick QuoteZEV – Free Report) , has yet to report results for the quarter ended March 2023. The results are expected to be released on May 15.

This company is expected to post quarterly loss of $4.51 per share in its upcoming report, which represents a year-over-year change of +9.8%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days.

Lightning eMotors, Inc.’s revenues are expected to be $6.65 million, up 22.9% from the year-ago quarter.

Ford Motor Company (F Quick QuoteF – Free Report) has been one of the most searched-for stocks on Zacks.com lately. So, you might want to look at some of the facts that could shape the stock’s performance in the near term.

Over the past month, shares of this company have returned +13.4%, compared to the Zacks S&P 500 composite’s +6.2% change. During this period, the Zacks Automotive – Domestic industry, which Ford Motor Company falls in, has gained 2.5%. The key question now is: What could be the stock’s future direction?

While media releases or rumors about a substantial change in a company’s business prospects usually make its stock ‘trending’ and lead to an immediate price change, there are always some fundamental facts that eventually dominate the buy-and-hold decision-making.

Revisions to Earnings Estimates

Here at Zacks, we prioritize appraising the change in the projection of a company’s future earnings over anything else. That’s because we believe the present value of its future stream of earnings is what determines the fair value for its stock.

Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock’s fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.

For the current quarter, Ford Motor Company is expected to post earnings of $0.36 per share, indicating a change of -5.3% from the year-ago quarter. The Zacks Consensus Estimate has changed +5.8% over the last 30 days.

For the current fiscal year, the consensus earnings estimate of $1.50 points to a change of -20.2% from the prior year. Over the last 30 days, this estimate has changed -0.5%.

For the next fiscal year, the consensus earnings estimate of $1.60 indicates a change of +6.9% from what Ford Motor Company is expected to report a year ago. Over the past month, the estimate has changed -0.4%.

Having a strong externally audited track record, our proprietary stock rating tool, the Zacks Rank, offers a more conclusive picture of a stock’s price direction in the near term, since it effectively harnesses the power of earnings estimate revisions. Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, Ford Motor Company is rated Zacks Rank #4 (Sell).

The chart below shows the evolution of the company’s forward 12-month consensus EPS estimate:

12 Month EPS

Projected Revenue Growth

Even though a company’s earnings growth is arguably the best indicator of its financial health, nothing much happens if it cannot raise its revenues. It’s almost impossible for a company to grow its earnings without growing its revenue for long periods. Therefore, knowing a company’s potential revenue growth is crucial.

In the case of Ford Motor Company, the consensus sales estimate of $36.01 billion for the current quarter points to a year-over-year change of +12.2%. The $149.52 billion and $151.45 billion estimates for the current and next fiscal years indicate changes of +0.3% and +1.3%, respectively.

Last Reported Results and Surprise History

Ford Motor Company reported revenues of $41.8 billion in the last reported quarter, representing a year-over-year change of +18.4%. EPS of $0.51 for the same period compares with $0.26 a year ago.

Compared to the Zacks Consensus Estimate of $39.34 billion, the reported revenues represent a surprise of +6.25%. The EPS surprise was -15%.

Over the last four quarters, the company surpassed EPS estimates just once. The company topped consensus revenue estimates three times over this period.

Valuation

No investment decision can be efficient without considering a stock’s valuation. Whether a stock’s current price rightly reflects the intrinsic value of the underlying business and the company’s growth prospects is an essential determinant of its future price performance.

While comparing the current values of a company’s valuation multiples, such as price-to-earnings (P/E), price-to-sales (P/S) and price-to-cash flow (P/CF), with its own historical values helps determine whether its stock is fairly valued, overvalued, or undervalued, comparing the company relative to its peers on these parameters gives a good sense of the reasonability of the stock’s price.

The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to both traditional and unconventional valuation metrics to grade stocks from A to F (an An is better than a B; a B is better than a C; and so on), is pretty helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.

Ford Motor Company is graded A on this front, indicating that it is trading at a discount to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.

Bottom Line

The facts discussed here and much other information on Zacks.com might help determine whether or not it’s worthwhile paying attention to the market buzz about Ford Motor Company. However, its Zacks Rank #4 does suggest that it may underperform the broader market in the near term.