After Ford’s (F) fourth-quarter miss was announced on February 2, 2022, I listened to John Lawler and Kumar Galhotra, the CFO and President of Ford Americas, respectively, during their Bank of America Fireside Chat 2-8-22. I am not convinced that Ford has a big enough bang planned as it goes through its transition from an internal combustion engine maker to an electric vehicle maker to overtake Tesla (TSLA) or General Motors (GM).
Don’t get me wrong; I would not sell the stock if you own it. Still, I would not pick this company to lead the pack as car companies transition from internal combustion engines to electric vehicles that autonomously drive themselves.
After listening to this call and several others like it last year, Ford’s corporate strategy to move forward is to leverage the strength of its product portfolio (Mustang, Bronco, F150, etc.) to continue to draw in customers. During the BoA Fireside chat, John Lawler said that demand has outpaced supply for many months and that he sees this continuing for at least the following year.
He also said that despite a significant fourth-quarter earnings miss, the company is seeing headwinds shift with COVID-19 getting back under control in much of the world and suppliers beginning to catch up with the demand for parts.
I also listened to Deutsche Bank’s Virtual Auto Tech Conference on December 9, 2022, where Stuart Taylor discussed Ford’s plans for interconnectivity throughout its product portfolio very briefly.
While the company plans to add a software layer that will turn customers who buy a car into customers who also purchase services through a monthly subscription plan, I feel that GM has a much stronger transition plan for interconnectivity. With GM’s purchase of Cruise, it will also beat Ford to autonomous driving cars.
Recent Results and Dividend
Ford’s stock has been trading between $11.13 (the 52-week low set on May 12, 2021) and $25.87 (the 52-week high set on January 14, 2022).
Ford brought in revenues of $136.3 billion over the last twelve months and a net income of $17.9 billion over the same period.
The company has reported fourth-quarter earnings of $0.26 per share, missing analyst estimates by $0.15. It has also reported $1.79 in earnings per share for 2021, beating analyst estimates of $1.14 by $0.65 during that period.
F currently pays a dividend of $0.10 per quarter. This is a dividend yield of 2.2%; Ford’s dividend has been sporadic (having only been paid out for the past two quarters).
The company has a solid balance sheet. F has a current ratio of 1.2, so it has enough current assets on hand to pay its bills for over a year.
When I calculated the stock’s intrinsic value by modeling discounted cash flows, I pegged it at $64.05. However, I do not see a catalyst that will drive the share price that high.
Wall Street’s Take
17 Wall Street analysts currently cover F and have issued 12-month estimates for the price. Of the 17 analysts, eight rate the stock as a Buy, seven rate it a Hold, and two rate it as a Sell.
The average Ford price target is $23.63, implying 32.4% upside potential. The high price target is $32, and the low target is $13 per share.
TipRanks.com shows that of the 46 bloggers that have blogged about Ford, 88% of them are bullish, while the sector average is approximately 71% are bullish on the consumer goods sector in the last three months.
Conclusion
Based on the intrinsic value of this stock, the Wall Street analyst’s estimates, blogger estimates covering Ford, and management’s transition plan to electric vehicles, I am neutral on this stock.
I think that Ford’s plans to dominate the car market rely too heavily on its portfolio and do not emphasize the consumer’s tastes changing as electric vehicles with autonomous driving capabilities become more popular.
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