Ford Earnings: Pro Continues to Impress While EV Costs Are Contained
Ford raised its free cash flow guidance and expects to lower costs; the stock remains undervalued.
Key Morningstar Metrics for Ford Motor
- Fair Value Estimate: $19.00
- Morningstar Rating: 4 stars
- Morningstar Economic Moat Rating: None
- Morningstar Uncertainty Rating: High
What We Thought of Ford Motor’s Earnings
Ford Motor’s F stock rose by over 2% during after-hours trading on April 24 after the firm reported adjusted first-quarter diluted earnings per share of $0.49, down 22.2% year over year but beating the $0.42 LSEG consensus. Ford raised its free cash flow guidance to a midpoint of $7 billion from $6.5 billion on lower capital expenditure as it delays electric vehicle capacity increases.
Management kept full-year total company adjusted EBIT guidance of $10 billion-$12 billion, but it said results are tracking to the higher end of that range—a considerable improvement from 2023′s $10.4 billion, but still down slightly excluding the $1.7 billion impact of the UAW strike. Segment level guidance is unchanged, and Ford still expects to lower costs by $2 billion on less spending in freight, materials, and engineering. We maintain our fair value estimate of $19 per share.
Total company adjusted EBIT fell 18.2%, with unfavorable variances of about $1.7 billion in the Ford Blue combustion segment and $600 million in the Model e electric vehicle segment to blame. The Model e lost $1.3 billion (nearly double the prior year’s quarter) on pricing headwinds, but segment costs were flat. Blue’s mix suffered from 60,000 F-150 pickups being held for quality reasons, but these vehicles will be wholesaled in the second quarter.
The star was again the Ford Pro commercial vehicle segment, which is asset-light and had a $2.5 billion tailwind from volume, mix, and pricing offsetting $1.1 billion higher investment costs. Segment EBIT more than doubled to $3 billion from $1.3 billion on a margin of 16.7%, up 640 basis points. Pro’s revenue rose 36% to $18 billion on the new Super Duty and Transit van sales, as well as more software and service growth. Pro now has 13% of its EBIT from software and physical services, and it targets at least 20% in a few years. Software subscriptions rose 43% to over 560,000 commercial customers.
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