Ford Motor Company (NYSE:F)’s bid to improve transparency around its financial performance and confirmation of its 2023 guidance are no grounds to change estimates for the car manufacturer, according to analysts at Jefferies.
Ford on Thursday unveiled its intention to report financial results by group (Ford Blue, Ford Model e, and Ford Pro), instead of by geographic regions.
Analysts gave Ford an “A- for effort on disclosure” in providing clear expectations for its electric vehicle division’s losses which are set to come in at US$3bln for 2023.
“The lack of share price reaction must have disappointed management, in our view, given anticipation of the event and the sheer amount of work put into improving transparency,” the analysts wrote in a note to clients.
“The roadmap to Battery Electric Vehicle profitability looks steep but also driven more by internal performance than Inflation Reduction Act subsidies, which is positive.”
Ford on Thursday also affirmed its full-year 2023 guidance of adjusted earnings before interest and taxes (EBIT) of US$9bln to US$11bln and adjusted free cash flow (FCF) of about US$6bln.
The analysts said the car maker’s unchanged near- and medium-term guidance and the combination of OEM margin erosion and re-investment kept them on the sidelines.
They maintained their ‘hold’ rating and price target of US$13. Ford shares had dipped about 0.5% to US$11.37 on Friday morning in New York.
However, they pointed out that Ford’s presentations and confirmation of guidance were encouraging, notably, the expected underlying improvement to Blue and near doubling of Pro to US$6bln, which the analysts said is more consistent with the division’s potential.
“Based on current market uncertainties, we keep our adjusted EBIT at US$9.3bln, towards the lower end of guidance (US$9bln to US$11bln) with FCF US$3.5bln, below the US$6bn guided, given the magnitude of re-investment and the absence of a dividend from Credit,” they wrote.
“Ford's approach, including Pro sourcing vehicles from Blue and Model e, does not lend itself to asset separation, which management confirmed. First quarter results and the May 22 investor day need to provide more confidence in Ford's execution.”
Contact the author at emily.jarvie@proactiveinvestors.com
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