Interactive Investor

ii view: Ford starts year well but guidance unchanged

3rd May 2023 15:20

by Keith Bowman from interactive investor

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A mix of traditional and electric vehicles and offering an attractive dividend yield. We assess prospects. 

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First-quarter results to 31 March

  • Revenue up 20% to $41.5 billion
  • Adjusted earnings up 66% to $0.63 per share
  • Quarterly dividend of 15 cents per share, unchanged from previous quarter

Chief executive Jim Farley said:

“Ford Pro is leading the way on profitable growth, our big investments in iconic Ford Blue vehicles and derivatives are winning with customers, and Ford Model e’s different approach to EVs is significantly reducing costs on our first high-volume products while rapidly developing breakthrough next-generation vehicles from the ground up.”

ii round-up:

Auto maker Ford Motor Co (NYSE:F) reported first-quarter results which beat Wall Street forecasts, but it only maintained full-year expectations as losses continued at its electric vehicle (EV) business. 

Adjusted earnings of $0.63 per share was up 66% year-over-year, surpassing analyst forecasts for $0.41, with growing profits at its traditional cars and commercial vehicles operation easily offsetting the electric vehicles deficit.

Shares in the S&P 500 company are marginally higher having come into this latest news little changed year-to-date. That’s similar General Motors Co (NYSE:GM), while Tesla Inc (NASDAQ:TSLA) shares are up around 30% during 2023. The S&P 500 index itself is up by 7%. 

Ford now operates across three divisions. Ford Blue accounts for traditional petrol and hybrid vehicles, Ford Pro encompasses its commercial vehicles and services, while Ford Model e is electric vehicles. 

Sales for the three months to the end of March rose by a fifth to $41.5 billion, with vehicle shipments of almost 1.1 million up 9%. 

Adjusted profit at Ford Pro nearly tripled to $1.4 billion, with profit for Ford Blue doubling to $2.6 billion. Losses at Ford Model e rose to $722 million from the year ago quarter’s loss of $342 million. 

Management still expects adjusted profit for full year 2023 to be between $9 billion and $11 billion, with losses of around $3 billion for electric vehicles. That offsets profit for Ford Blue and Pro businesses. 

Adjusted profit was $10.4 billion in 2022, which was little changed from 2021 given a cocktail of higher costs, ongoing supply chain issues and lower than planned production. 

In April, Ford declared a quarterly dividend of $0.15 per share, unchanged from the prior quarter if you exclude a special dividend from the 2022 stake sale in electric pick-up truck maker Rivian Automotive Inc Class A (NASDAQ:RIVN).

ii view:

Headquartered in Dearborn Michigan, Ford employs over 170,000 people globally. Its brands include both Ford itself and Lincoln vehicles. Most of its sales at around three-fifths still come from its home US market, with other important markets being Canada, the UK and Germany. 

For investors, losses and required investment at its electric vehicle business continue. The economic outlook remains uncertain, with interest rates having increased, costs for businesses generally remain elevated, while its operational execution has by management’s own admission previously fallen short of requirements. 

On the upside, initiatives including cutting costs are being pursued. Its market share in the key North American pick-up truck sector remains strong, while its balance sheet holds almost $29 billion in cash. 

For now, and while continued electric vehicle losses are reason for caution, an estimated future dividend yield of over 6% at least rewards income investors for staying onboard until EVs turn a profit. 

Positives

  • Action to restructure the business taken
  • Attractive dividend yield (not guaranteed)

Negatives

  • Previous operational challenges
  • Elevated costs

The average rating of stock market analysts:

Hold

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