Bull of the Day: Ford Motor Company (F)
EVs are still in their infancy and the historic automaker's big electric push is already turning heads...
The Ford Motor Company F certainty didn’t kick start the modern electric vehicle revolution, as it did with the original automobile wave. Luckily for Ford and investors, EVs are still in their infancy and the historic automaker’s big electric push is already turning heads.
All In on EVs
Ford dove headfirst into EVs under new CEO Jim Farley, who officially took over in October of 2020. Since then, Ford has focused almost entirely on bringing the historic automaker into the future. These efforts include EVs and the accompanying digital services for the tech-filled vehicles.
On top of that, Ford aims to boost its electric appeal and relationships with its array of commercial customers, from contractors and construction companies to police departments and other government fleets. Its commercial business is set to bring in more recurring revenue as companies pay to monitor their connected fleets. This segment should also help it stand out against Tesla TSLA.
Ford is currently the nation’s No. 2 automaker by sales and it was the best-selling automaker in the fourth quarter. The company’s F-Series was the best-selling truck for the 45th year running and the best-selling vehicle for the 40th straight year. Plus, Ford’s early EV efforts are already paying off in a big way.
Ford rolled out an all-electric version of its famous Mustang in late 2020. The Mach-E is far more of a crossover and aims to compete closely against Tesla’s small SUVs. Despite some early skeptics, Ford’s Mustang Mach-E was named the “Electric Vehicle of the Year” by Car and Driver in 2021.
More importantly, Ford was the No. 2 overall electric vehicle seller in 2021, behind only Tesla. Ford’s EVs grew 36% faster than the segment as a whole last year. Ford also posted impressive sales to end the year in December. And the company’s EV age is just starting.
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Ford turned heads when it showed off the all-electric version of its hugely popular F-150 back in May of 2021. The F-150 Lightning quickly pulled in well over 100,000 reservations. The upside growth is massive since over 75% of those early reservations came from customers new to Ford.
Better still, Ford said on Tuesday that nearly 200,000 reservations have now been placed for the F-150 Lightning. The company also announced plans to nearly double its goal for manufacturing the Lightning, targeting over 150,000 a year. Deliveries of the F-150 Lightning pickups will begin this spring at a starting MSRP of $39,974, before any available tax incentives.
Along with the early demand and increased production for the Lightning, Ford plans to triple Mach-E production and expects to reach 200,000-plus units per year by 2023. Looking ahead, Ford is set to launch an EV line of its best-selling commercial vans, dubbed E-Transit, which are projected to go on sale this year. Ford has also teased plans to sell EV versions of the Explorer and the Lincoln Aviator down the road.
All in, Ford is investing over $30 billion in EVs through 2025 and it plans to cement its place as the No. 2 EV maker in North America and “then challenge the No. 1 spot” (from Tesla). These efforts crucially include major investments in battery tech and manufacturing. The company said it will have the global capacity to produce 600,000 battery EVs annually within the next two years.
Wall Street has bought into Ford’s EV future, with the stock up 170% in the past year to leave its industry and the benchmark S&P 500 index in the dust. The showing includes a 62% climb in the last three months. And the stock surged over 10% on Tuesday to 52-week highs, following its EV updates.
Ford shares popped again through mid-day trading Thursday to hover at $24.42 a share. The stock might be a bit overheated at the moment and could face some near-term selling pressure. Still, it has miles of road left before it returns to the $30 a share it traded at in the late 1990s.
On the valuation front, Ford trades at 12.6X forward 12-month earnings. This represents some value compared to its year-long highs and a huge discount to the S&P 500’s 21.1X and the Autos-Tires-Trucks Market’s 31.1X.
Along with its solid valuation and great run, investors should be pleased to know that Ford reinstated its dividend after a pandemic pause, having made its first post-stoppage payment on Dec. 1. Ford’s current dividend yield sits at roughly 1.7% to match the recently-rising 10-year U.S. Treasury.
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Ford was able to successfully manage the semiconductor shortage in the latter stages of last year and its outlook is strong. Zacks estimates call for Ford’s adjusted FY21 earnings to soar 360% from $0.41 to $1.88 a share on nearly 13% higher revenue.
Ford is then projected to post another EPS gain in FY22 despite the tough-to-compete against period. And its 2022 revenue is expected to jump 13% higher to $147.31 billion to inch within striking distance of its pre-pandemic total.
Ford, perhaps ambitiously, said it expects fully electric vehicles to generate 40% of global sales by 2030. The company is investing more money into the tech side, which is vital since EVs rely heavily on interconnected tech and remote software updates. Ford in September even poached a former Tesla executive from Apple to help with these efforts. Ford is also crucially planning to manufacture its own batteries.
Ford’s EPS outlook has improved since its Q3 release to help it land a Zacks Rank #1 (Strong Buy) right now. It’s also crushed our bottom-line estimates by an average of 355% in the trailing four periods. And even with all of the excitement, EVs made up roughly 3% of all vehicle sales in 2021, which means there’s still time to get in near the starting line.
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