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Ford (F) Adjusts EV Strategy: How Should You Play the Stock Now?
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Ford (F - Free Report) has announced adjustments to its electric vehicle (EV) strategy amid slower-than-expected EV adoption and pricing pressure as automakers are resorting to generous discounts. With competition intensifying and the path to profitability in the EV business proving more complex than anticipated, Ford is rethinking its approach to ensure sustainable growth and competitiveness. In this context, we’ll discuss Ford’s updated EV plans and how investors should approach the stock in the current environment.
Ford’s Updated EV Strategy
Ford has decided to delay the launch of its next-generation all-electric pickup truck, dubbed "Project T3," at its new Tennessee plant from 2025 to the second half of 2027.
Moreover, Ford is scrapping its plans for a three-row electric SUV, a move that will result in a $400 million non-cash charge and potential additional costs of up to $1.5 billion. Instead, the company is pivoting toward hybrid models, which it believes will be more profitable and better aligned with current consumer preferences. The automaker has announced that it will reduce capital spending on EVs, allocating 30% of its annual capital budget to their development, down from the previous 40%.
Despite these setbacks, Ford is not abandoning its EV ambitions altogether. The company plans to introduce a new commercial electric van in 2026 and two new pickup trucks in 2027. Additionally, it still expects to start battery cell production at its Tennessee site in 2025, a critical step in securing the supply chain for its future EVs.
Considerations Before Investing in Ford
In the near term, Ford is likely to face headwinds, particularly in its Model e unit. The company incurred a loss of $2.46 billion on EVs in the first half of 2024. It is expected to report a full-year loss between $5 billion and $5.5 billion. This loss, attributed to pricing pressure and increased investments in next-generation EVs, is a significant concern for Ford’s overall profitability.
Additionally, Ford’s warranty and recall costs have been on the rise, reaching $2.3 billion in the second quarter of 2024. While the company is actively working to improve the quality of its newer models, warranty costs are expected to remain elevated for the next 12 to 18 months, further weighing on the company's overall profits.
Over the past seven days, the Zacks Consensus Estimate for Ford’s 2024 EPS has moved south by 2 cents to $1.88, implying a 6.5% year-over-year decline.
Despite these challenges, Ford’s long-term prospects remain promising. The Ford Pro unit, which focuses on commercial vehicles, is expected to be a major growth driver. The company has raised its EBIT forecast for this unit from $8-$9 billion to $9-$10 billion, supported by strong order books, increasing demand and the successful launch of the all-new Super Duty. Ford’s focus on software technology and services is also expected to play a crucial role in its future growth.
Ford's robust product lineup, including the popular F-series trucks, Maverick pickup and SUV models like the Escape, Explorer, and Expedition, continues to resonate with consumers. Its battery-electric vehicles, such as the Mustang Mach-E, E-Transit, and F-150 Lightning, are also gaining traction in the market.
We like the company's strong balance sheet, with liquidity of approximately $45 billion, and an impressive annual dividend yield of over 5%.
Add Ford to Your Watchlist
Ford's stock has declined roughly 10% over the past three months, underperforming the broader industry and also its closest peer General Motors (GM - Free Report) . However, when compared to other auto biggies like Stellantis (STLA - Free Report) and Toyota (TM - Free Report) , Ford fares better.
3-Month Price Performance Comparison
Image Source: Zacks Investment Research
From a valuation standpoint, Ford appears attractive now. Its forward earnings multiple of 5.57 is lower than both the industry average and its own five-year average. Ford has a Value Score of A.
Image Source: Zacks Investment Research
The Zacks average price target for Ford is $13.62 per share, suggesting a nearly 26% upside from current levels.
Image Source: Zacks Investment Research
While Ford faces near-term challenges, particularly in its EV segment, the company’s strong fundamentals position it well for long-term growth. Investors should keep an eye on Ford’s progress in reducing warranty costs and achieving profitability in its EV unit. With a solid dividend yield, an attractive valuation and promising prospects in the Ford Pro unit, the stock is worth being on your watchlist.
Image: Bigstock
Ford (F) Adjusts EV Strategy: How Should You Play the Stock Now?
Ford (F - Free Report) has announced adjustments to its electric vehicle (EV) strategy amid slower-than-expected EV adoption and pricing pressure as automakers are resorting to generous discounts. With competition intensifying and the path to profitability in the EV business proving more complex than anticipated, Ford is rethinking its approach to ensure sustainable growth and competitiveness. In this context, we’ll discuss Ford’s updated EV plans and how investors should approach the stock in the current environment.
Ford’s Updated EV Strategy
Ford has decided to delay the launch of its next-generation all-electric pickup truck, dubbed "Project T3," at its new Tennessee plant from 2025 to the second half of 2027.
Moreover, Ford is scrapping its plans for a three-row electric SUV, a move that will result in a $400 million non-cash charge and potential additional costs of up to $1.5 billion. Instead, the company is pivoting toward hybrid models, which it believes will be more profitable and better aligned with current consumer preferences. The automaker has announced that it will reduce capital spending on EVs, allocating 30% of its annual capital budget to their development, down from the previous 40%.
Despite these setbacks, Ford is not abandoning its EV ambitions altogether. The company plans to introduce a new commercial electric van in 2026 and two new pickup trucks in 2027. Additionally, it still expects to start battery cell production at its Tennessee site in 2025, a critical step in securing the supply chain for its future EVs.
Considerations Before Investing in Ford
In the near term, Ford is likely to face headwinds, particularly in its Model e unit. The company incurred a loss of $2.46 billion on EVs in the first half of 2024. It is expected to report a full-year loss between $5 billion and $5.5 billion. This loss, attributed to pricing pressure and increased investments in next-generation EVs, is a significant concern for Ford’s overall profitability.
Additionally, Ford’s warranty and recall costs have been on the rise, reaching $2.3 billion in the second quarter of 2024. While the company is actively working to improve the quality of its newer models, warranty costs are expected to remain elevated for the next 12 to 18 months, further weighing on the company's overall profits.
Over the past seven days, the Zacks Consensus Estimate for Ford’s 2024 EPS has moved south by 2 cents to $1.88, implying a 6.5% year-over-year decline.
Despite these challenges, Ford’s long-term prospects remain promising. The Ford Pro unit, which focuses on commercial vehicles, is expected to be a major growth driver. The company has raised its EBIT forecast for this unit from $8-$9 billion to $9-$10 billion, supported by strong order books, increasing demand and the successful launch of the all-new Super Duty. Ford’s focus on software technology and services is also expected to play a crucial role in its future growth.
Ford's robust product lineup, including the popular F-series trucks, Maverick pickup and SUV models like the Escape, Explorer, and Expedition, continues to resonate with consumers. Its battery-electric vehicles, such as the Mustang Mach-E, E-Transit, and F-150 Lightning, are also gaining traction in the market.
We like the company's strong balance sheet, with liquidity of approximately $45 billion, and an impressive annual dividend yield of over 5%.
Add Ford to Your Watchlist
Ford's stock has declined roughly 10% over the past three months, underperforming the broader industry and also its closest peer General Motors (GM - Free Report) . However, when compared to other auto biggies like Stellantis (STLA - Free Report) and Toyota (TM - Free Report) , Ford fares better.
3-Month Price Performance Comparison
From a valuation standpoint, Ford appears attractive now. Its forward earnings multiple of 5.57 is lower than both the industry average and its own five-year average. Ford has a Value Score of A.
The Zacks average price target for Ford is $13.62 per share, suggesting a nearly 26% upside from current levels.
Image Source: Zacks Investment Research
While Ford faces near-term challenges, particularly in its EV segment, the company’s strong fundamentals position it well for long-term growth. Investors should keep an eye on Ford’s progress in reducing warranty costs and achieving profitability in its EV unit. With a solid dividend yield, an attractive valuation and promising prospects in the Ford Pro unit, the stock is worth being on your watchlist.
The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.