Ford Motor Company (NYSE: F) is a global company based in Dearborn, Michigan. The company designs, manufactures, markets, and services a full line of Ford cars, trucks, SUVs, electrified vehicles and Lincoln luxury vehicles, provides financial services through Ford Motor Credit Company and is pursuing leadership positions in electrification, autonomous vehicles, and mobility solutions.
On Oct 24th, 2018, the company announced its financial results for the third quarter and provided an update on its business. Company revenue was up 3 percent year over year, with net income and company adjusted EBIT both down year over year, primarily driven by continued challenges in China. In North America, the company delivered an 8.8 percent EBIT margin, supported by more than $1 billion of the improved mix, thanks to the continued shift towards utilities and trucks, as well as high-end trim models.
Management commentary on the quarterly performance:
This quarter shows that our business remains very strong in key areas. We continue to make progress on our efforts to redesign Ford to be far more competitively fit, disciplined in capital allocations and nimble enough to win in a fast-changing world,” said Jim Hackett, Ford president, and CEO. “With products like the Edge ST and Ranger launching in the United States and the Territory SUV in China, we are also building momentum shifting our product portfolio to build on our strengths and meet shifting consumer demand.”
The company’ business risk profile was impacted due to ongoing trade wars with China and inflationary interest environment driven by Federal Reserve. Furthermore, rising commodity prices caused pricing pressure issues in Europe, and offtake risk in China. However, notwithstanding these current headwinds, the company’ fundamental market and operating profile continue to remain robust. The company is still profitable and trading at a very attractive valuation and has a globally diversified business in all the strategic markets. Analyst tracking the stock believes that the company is available at an attractive valuation and the recent underperformance of the stock should be considered as a buying opportunity.
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Third Quarter Highlights:
- Company revenue up 3 percent in the quarter, driven by a favorable mix of higher margin products and high-end trim levels, especially in North America
- Balance sheet remains strong, with company cash of $23.7B and total liquidity of $34.7B
- North America margin at 8.8 percent, with continued shift to higher margin utilities and trucks
- Ford Credit generated an EBT of $678 million, its best quarter in more than seven years
Robust balance sheet and financial flexibility: The company balance sheet remains strong, with $23.7 billion of cash and $34.7 billion of total liquidity. Ford is also reaffirming adjusted EPS guidance for the full year in the range of $1.30 to $1.50 and positive cash flow that will be lower than 2017. Ford also said that as a result of the higher costs and uncertainty impacting the entire sector, coupled with unexpected deterioration this year in the Europe and China business, current company forecasts show that it will not reach its previously announced 8 percent EBIT margin or high teens ROIC targets by 2020. However, the company continues to attack costs, increase the operational fitness of the business and remains committed to hitting these targets over time.
Other recent announcements:
More recently on January 3rd, the company presented U.S. December 2018 Sales. As per management, December capped another strong year for Ford, and the industry Ford sold more than 900,000 F-Series trucks in 2018 to extend Ford’ leadership position to 42 consecutive years as America’s best-selling pickup; The Company’ commercial vans mark 40 straight years of leadership, and it had a record year for Ford SUVs, all of which helped it to post its ninth straight year as America’s best-selling brand.
Analyst ratings and target price: Per www.marketbeat.com, 17 Wall Street analysts have issued ratings and price targets for Ford Motor in the last 12 months. Their average twelve-month price target is $10.9875, suggesting that the stock has a possible upside of 35.98%. The high price target for F is $15.00, and the low-price target for F is $6.00.
Below are the excerpts of recent analyst rating/Price targets on the company:
About Ford Motor Company: Ford Motor Company is a global company based in Dearborn, Michigan. The company designs, manufactures, markets, and services a full line of Ford cars, trucks, SUVs, electrified vehicles and Lincoln luxury vehicles, provides financial services through Ford Motor Credit Company and is pursuing leadership positions in electrification, autonomous vehicles, and mobility solutions. Ford employs approximately 200,000 people worldwide.
Financial Results: Company Key Metrics Summary
- 3Q top-line mixed with revenue higher than a year ago
- Net income at $1B, down $0.6B
- The company adjusted EBIT at $1.7B, down $0.6B, primarily Automotive, mainly China
- The company adjusted EPS at $0.29, down $0.15; adjusted effective tax rate of 11%
- The company changed EBIT margin at 4.4%, down 1.9 ppts; mainly AP, principally China, and Europe
- The company adjusted operating cash flow at $0.1B, $1.4B higher driven by timing differences and working capital
Key Stock Influences:
- The company’ business performance has displayed a degree of cyclicality in line with economic growth, in the past. The company will remain exposed to the cyclicality inherent in the economy and auto businesses over the medium term. It said Ford’ strong financial risk position would help it absorb the impact of cyclicality and competitive intensity in its various business segments.
- The company is undergoing a strategic shift to zero-emission vehicles, and any time or cost overruns in those endeavors might impinge the overall performance of the company.
- The company is exposed to changes in regulation which may adversely impact its business risk profile.
- Any unexpected decline in market share, which results in weakening of the company’s overall market position.
- External and macro factors such as regulations, state of the economy, government policies, and liquidity in the market also have a bearing on the business potential of Ford.
- On Friday, January 4th, 2018, Ford closed at $8.08 on an average volume of 49 million shares exchanging hands. Market capitalization is $32.141 billion. The current RSI is 42.97
- In the past 52 weeks, shares of Ford have traded as low as $7.41 and as high as $13.48
- At $8.08, shares of Ford are trading below its 50-day moving average (MA) at $8.86 and below its 200-day MA at $9.90
- The present support and resistance levels for the stock are at $7.75 & $8.29 respectively.
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