Ford: Lowering Fair Value Estimate on 2025 Guidance and Lower Revenue Over Time

After rolling our Ford discounted cash flow model forward a year for the recent 10-K filing, we are lowering our per share fair value estimate to $16 from $19. The change is from modeling lower revenue and profitability over our five-year explicit forecast period to reflect 2025 guidance and slower electric vehicle growth. Total revenue in our forecast period is about 4% lower than our prior model while average EBIT margin excluding equity income is now 60 basis points lower at 3.7%. Our midcycle margin for this metric remains unchanged at slightly over 5%. We expect difficult years in 2025 and 2026 for the Model e segment due to the launch of the new generation EV pickup not coming until sometime in 2027. We believe Ford will improve its EV battery costs between 2025 and 2027 but without meaningful sales volume to scale expenses, improvements won’t be drastically visible via profit for a few more years.