Ford Motor Company

  • Ford recently reported a robust set of financial results with a large beat on both   the top and bottom lines. The company also raised guidance for the full year   2021.

  • Non-GAAP   EPS of $0.13 reflects a beat of $0.09 compared to a loss of$0.35 in the same   quarter in 2020.

  • Revenue   grew 45% year-on-year to $24.1 bn, an increase of $1.29b.

  • Ford   also indicated a strong rise in guidance for the year, with an adjusted EBIT   range of $9bn - $10bn, an increase of 50%. Another significant increase in   the guidance was the adjusted FCF of $4bn-$5bn, resulting in an attractive   12x FCF valuation. This was aided by a proactive management strategy and a   reopening of global economies, especially in the US, resulting in buoyant   consumer demand following pandemic lockdowns.

  • The   company appears to be in turnaround mode after years of underperformance,   with the launch of a slew of new models. The launch of electric vehicles was   a major game changer, in an era where a major transition from fossil fuels to   a cleaner, more environmentally friendly, energy is fast gaining momentum.

  • This   has had and will continue to have a significant impact on all facets of the   global economy, with the worldwide automotive industry required to implement   new business strategies, in order to benefit from a new business paradigm.

  • New   products such as the Ford Mustang, Maverick and E150 Lightning trucks, are   among the new model launches. Orders for the new EV truck are already in   excess of 120,000, with its operating margins higher than its more   conventional product range.

  • Ford’s   major restructuring is already showing results in its European operations,   and the introduction of EV vehicles with higher margins should be a plus,   factor. Strong brands such as that of the F150 trucks, one of the most   popular pick up trucks in the world, is a testament to the popularity and   loyalty towards several of its products.

  • The   company is expecting full-year volumes to rise by 30%, which would result in   higher plant utilization and economies of scale and a positive impact on the   bottom line EPS numbers. However the shortage of semi-conductor chips, a   crucial aspect in the production of EV vehicles, could pose a challenge in   the short term.

  • Ford   anticipates improvements in the availability of semi-conductors during the   second half of 2021, and believes that the joint venture with a leading South   Korean, battery manufacturer should be a positive going forward.

  • Although   vehicle sales in July experienced a downturn, EV sales were up by 57.5%. This   should prove to be a major catalyst for a transformation in the company,   which already has an impressive order book.

  • The company’s share price year-to-date has increased by around 59%, off a low base, and still represents an inexpensive entry point on a forward PE of around 10x based on current estimates. At the current share price of $13.70 and, and a price to sales of 0.40x, some analysts see fair value at $18.00 per share for the counter by year end. I recently added the $55 bn company to segregated portfolios I manage, investing into the electric vehicle theme which should be the catalyst for the turnaround of the company’s fortunes.

Ford Motor Company