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Ford’s Segmental Restructuring Gets An Analyst Thumbs Up

Benchmark analyst Michael P. Ward reiterates a Buy rating on Ford Motor Co (NYSE:F) with a $19.00 price target. Ford disclosed realigned…
byAnusuya Lahiri
March 24, 2023
2 minute read
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  • Benchmark analyst Michael P. Ward reiterates a Buy rating on Ford Motor Co (NYSE:F) with a $19.00 price target.
  • Ford disclosed realigned segment reporting, breaking out performance for three auto segments, moving away from regional metrics that have been in place for decades. 
  • New segments include Ford Blue (global ICE and hybrid vehicles), Ford Model e (electric vehicles), and Ford Pro (commercial vehicles). 
  • As expected, Ford Blue and Ford Pro have been the primary profit drivers. In 2022, Ford Blue accounted for 96% of automotive revenue and generated margins at the EBIT level of 7.2% and 6.6%, respectively. By Ward’s estimates, combined revenue from the two segments will likely decline to 85% in 2024. 
  • Ford Model e (electric vehicles) generated $5.3 billion in revenue and reported an EBIT loss of $(2.1) billion. By Ward’s estimates, the loss is more than accounted for by the above-normalized Engineering and R&D spending to position the company to gain a share in the global BEV market. 
  • In 2022, Engineering R&D spending at Ford totaled $7.8 billion, and up to one-half could have been targeted toward electric vehicles and developing technologies. 
  • The company expects EV capacity to reach 2.0 million units by 2026 and EBIT margin to reach 8%, suggesting revenue of $100 billion and income of $8 billion. 
  • Ford reiterated 2023 guidance for adjusted EBIT of $9-$11 billion. Ward’s 2023 EPS estimate of $1.65 and 2024 estimate of $1.80 are unchanged. 
  • Ford has reduced its breakeven level in North America by 50% since 2008, new products have positioned the company to benefit from a global recovery in volume, and Ford’s balance sheet is more vital than ever heading into an upturn.
  • Price Action: F shares traded lower by 0.31% at $11.39 on the last check Friday.
 
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