Ford’s Q4 Results Were Tough, But Things Could Get Better

Ford (NYSE:F) published a weaker set of Q4 FY’22 earnings due to supply chain-related headwinds and production issues that impacted the company’s cost base. Ford’s operating profits fell short of both the company’s guidance and Street estimates, coming in at $2.6 billion. For perspective, Ford had guided adjusted operating income for the full year 2022 of between $11.5 billion and $12.5 billion, versus a final reported number of just about $10.4 billion. That said Ford’s revenues came in ahead of estimates, with automotive sales rising 18.4% versus last year to $41.8 billion. Volumes grew by about 4% versus last year and pricing also remained strong. However, Ford’s overall market share fell by 40 basis points versus last year to 5%.

Now, Ford’s recent execution has been weak, but we think that things will eventually look up. With inflation easing, the U.S. Federal Reserve has slowed down on the pace of its interest rate hikes (25 basis points hike last week, down from 75 and 50 basis point increases seen over 2022). This is a positive for the U.S. economy and for consumer spending. Ford expects its volumes to grow marginally over 2023. Ford’s EV production is also increasing quickly. While monthly EV production stood at about 12,000 in 2022, Ford expects this to reach 50,000 a month by the end of this year. Ford’s iconic brands such as the Mustang and F-150 could also help it win over customers as the market transitions to EVs.

Now the near-term pricing environment could be somewhat mixed, as supply improves across the industry. For perspective, Ford expects the average transaction prices for vehicles to decline by about 5% compared to last year although this would be offset partly by new launches as well as lower dealer margins. The company is also looking to restructure its cost base.  Although it didn’t provide too many specific details during its Q4 earnings call, it’s likely that cooling global inflation, as well as the easing of Covid-19 restrictions in China, could help the company’s input costs to an extent. Overall, Ford expects full-year 2023 adjusted operating earnings of $9 billion to $11 billion.

We think Ford’s valuation is quite reasonable at current levels, with the stock trading at under 8x 2023 consensus earnings. We value Ford stock at about $17.50 per share, which is roughly 30% ahead of the current market price. See our analysis on Ford Valuation: Expensive Or Cheap for more details on what’s driving our price estimate for Ford.  For more information on Ford’s business model and revenue trends, check out our dashboard on  Ford Revenue: How Ford Makes Money.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

[1] Month-to-date and year-to-date as of 2/6/2023
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market Beating Portfolios

See all Trefis Price Estimates