Source: Beast Finance Author: Beast Finance
On July 27, 2023, Ford Motor (F), one of the largest auto giants in the United States, announced its financial report for the second quarter of 2023.
On July 6, 2023, Ford Motor announced that car sales in the US market in the second quarter had increased by 11.7% compared with the first quarter of 2023, which encouraged investors. What's more, Mustang Mach-E sales continue to accelerate, with sales up about 110% this June compared to 2022. In comparison, the company's truck sales of 295,602 were up 26.2% year-on-year and 16.4% quarter-on-quarter, driven largely by the launch of the new Super Duty. Equally important, Ford CEO Jim Farley's innovative strategy in operations and the recovery of the U.S. economy have impacted Ford truck sales beyond pre-pandemic levels, a trend we expect to continue in the future go down.
On the other hand, in mid-July, Ford announced that its Rouge EV Center in Michigan would be temporarily closed for final factory upgrades. While in the short term, this may hurt the company's bottom line, after its launch, annual production of the F-150 Lightning will triple (to 150,000). Increasing the capacity of the plant will allow the company's management to lower its prices and continue to increase its share of the automotive market. This is especially important as inflation continues to fall, which could prompt the Federal Reserve to cut interest rates later this year. As a result, the car loan business will become easier for customers to accept and will trigger a new round of panic buying.
Despite negative impacts from conflicts in Ukraine and Russia, as well as persistently high interest rates that have limited some people's ability to buy cars, revenues at Ford's two main business units -- Ford Blue and Ford Pro -- have remained strong. is continuing to grow. As a result, Ford Motor's shares have risen more than 22% since the beginning of 2023, but at the same time, its industry rivals such as Ferrari (RACE), Honda Motor and Li Auto (LI) have also seen strong performances. increase.
Ford Motor's Financial Situation and Its Prospects
Ford's revenue for the first three months of 2023 was $41.47 billion, down 5.8% from the previous quarter and up 20.3% from the first quarter of 2022. Under CEO Jim Farley, the company has continued to make huge strides in expanding Ford's product range and rapidly gaining share in the growing electric vehicle market.
The Ford Blue division, which focuses on selling hybrid vehicles, as well as providing engines, spare parts, and accessories to retail customers, accounted for about 67.7% of the company's total revenue in the first quarter of 2023.
Ford Motor's revenue growth in the second quarter of 2023, compared to the same period last year, will be primarily driven by the continued upward trend in U.S. auto sales. Thus, during this period, 295,602 trucks were sold, which is 61,416 more than in the second quarter of 2022. In addition to cars, quarterly sales of SUVs and trucks also rose, which is especially important in the current period of monetary tightening by the Federal Reserve. Although one of the goals of this policy was to reduce lending and investment in the economy, many companies continued to update and expand their fleets of Ford vehicles to increase their productivity and further business growth.
Based on the current macroeconomic data, Beast Finance expects the Federal Reserve to cut interest rates in late 2023/early 2024. In the long run, this expected decline will increase the number of auto loan applications approved by banks. In addition, the $1 trillion Infrastructure Investment and Jobs Act signed by Bai Deng in 2021 continues to have a positive impact on the industry. However, many provisions of the bill will take effect from 2023 and will increase investment in energy infrastructure development, electric vehicle charging networks, road and bridge construction. Ultimately, Boldbeast Finance believes this will lead to continued growth in Ford sales between 2023 and 2026.
Ford Motor's operating margin for the first quarter of 2023 was 4.49%, continuing the momentum that began in the third quarter of 2022, and close to the median of 5.95% for the period from January 1, 2021 to the end of March 2023. At the same time, Boldbeast Finance predicts that Ford Motor's operating profit margin will continue to remain stable at 6.2% in 2023, and this value will increase to 9.4% by 2024. This is due to the reduction in the cost of raw materials for automobiles, the improvement of production capacity and the efficiency of the production process, and the layoff plan announced at the end of June.
Ford's EPS of $0.63 in the first three months of 2023 is up 23.5% sequentially, and more importantly, Ford has beaten analysts' EPS in six of the past nine quarters. widely expected.
Meanwhile, Ford Motor's non-GAAP P/E ratio of 6.41 is 52.6% below the industry average and 14.38% below the past five-year average. On the other hand, Ford Motor's P/E Non-GAAP is 7.19x, which shows that Ford Motor is significantly undervalued in the current period of declining global inflation.
Ford's unsecured debt has been diversified through the end of December 2022, allowing CEO Jim Farley to continue ramping up the production capacity needed to produce large numbers of Ford electric vehicles, which in recent months have seen market interest in Ford's electric vehicles. Demand for cars is also snowballing.
As of the end of the first quarter of 2023, Ford's total debt was about $139.29 billion, down slightly from 2021. However, despite Ford Motor's EBITDA growth over the past three quarters, the total debt/EBITDA ratio increased from 8.63x in 2021 to 9.76x.
While the total debt/EBITDA ratio is above 9.5 times (indicating continued increased financial risk), Ford management has done an excellent job of paying down and diversifying debt in recent years. In addition, considering the maturities of bonds and bonds, the growth of operating income in recent quarters, and the increase in car sales, Beast Finance does not expect Ford to have serious problems in debt repayment.
in conclusion
In early July 2023, Ford Motor announced that car sales in the US market in the second quarter had increased by 11.7% compared with the first quarter of 2023, which encouraged investors. While the Russia-Ukraine conflict has had a negative impact on the auto industry, CEO Jim Farley's innovative strategy on the business side has had a positive impact on Ford's U.S. sales. We expect this trend to continue as capacity increases in Europe.
And Ford's current dividend yield of 4.42%, growing operating income and demand for its electric vehicles will reduce the impact of short sellers on its stock price.