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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.

The world headquarters of the Ford Motor Company in Dearborn, Michigan.

Key Morningstar Metrics for Ford Motor

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.

Ford Stock vs. Morningstar Fair Value Estimate

Source: Morningstar Direct.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

David Whiston

Strategist
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David Whiston, CFA, CPA, CFE, is a strategist for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers the automotive industry, including dealerships, parts manufacturers, and automakers. He has covered the automotive industry since joining Morningstar in 2007.

Before Morningstar, Whiston spent four years in PricewaterhouseCoopers’ New York real estate audit practice and one year in its Chicago office working on real estate acquisition due diligence.

Whiston holds a bachelor’s degree in business administration with a concentration in accounting from the University of Richmond. He also holds a master’s degree in business administration with concentrations in finance, economics, and organizational behavior from the University of Chicago Booth School of Business. He holds the Chartered Financial Analyst® designation, and he is a Certified Public Accountant and a Certified Fraud Examiner. In 2012, he ranked first in the specialty retailers and services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey. He ranked first in the same industry in 2011.

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