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Ford to Re-enter India to Boost Exports: Is the Stock Worth Buying?
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U.S. auto biggie Ford (F - Free Report) is set to make a comeback in India, two years after shutting down production in the world's third-largest car market. The automaker plans to revive its manufacturing facility in Tamil Nadu, focusing on exports rather than domestic sales. This move aligns with Ford's broader “Ford+ Growth Plan,” which emphasizes global market expansion. Tamil Nadu is home to several car manufacturers, including Hyundai, Nissan (NSANY - Free Report) and Renault (RNLSY - Free Report) . Auto companies like VinFast (VFS - Free Report) and Tata Motors' Jaguar Land Rover division also plan to establish factories in the area to produce electric vehicles (EVs).
Ford's exit from India in 2021 followed years of unprofitability despite a $2 billion investment that failed to compete with dominant Asian rivals. However, this re-entry could signal a fresh opportunity for Ford to leverage its global business operations. The company aims to add up to 3,000 jobs over the next three years in India.
As F embarks on this new chapter in India, investors are left wondering: is Ford stock worth buying now amid its global ambitions and renewed focus on exports? Let’s dive deeper.
Factors to Drive Ford Stock
Ford is banking on its commercial vehicle division, Ford Pro, which continues to see strong demand. The successful launch of the all-new Super Duty and a robust order pipeline has led the firm to increase its 2024 EBIT forecast for Ford Pro unit from $8-$9 billion to $9-$10 billion. This division, encompassing vehicles, software and physical services, is crucial to Ford’s future, with software revenue expected to reach $1 billion by next year, boasting gross margins of more than 50%. By 2026, Ford Pro is projected to contribute 20% of the company’s total EBIT.
In the Ford Blue segment, the company’s iconic models, such as the F-150, Maverick, Bronco, and Mustang, present significant growth opportunities. The new F-150, Ranger, and revamped versions of the Explorer, Expedition and Navigator are set to drive revenue growth, with Ford anticipating improved profitability in the second half of 2024.
Despite near-term challenges for the Ford Model e division, it is positioned for long-term growth, focusing on scaling production, digital manufacturing efficiency and vertical integration. Ford’s popular EVs, including the Mustang Mach-E and F-150 Lightning, will continue to support shipments, with new EV models planned in the coming years.
The company’s strong liquidity position, with around $27 billion in cash, enables ongoing investment in its Ford+ strategy, while a dividend yield exceeding 5% makes it attractive to income-focused investors. Encouragingly, Ford has raised its adjusted free cash flow (FCF) projection for the year by $1 billion to a range of $7.5-$8.5 billion. It targets distributions of 40-50% of FCF going forward, demonstrating its commitment to shareholder return.
Image Source: Zacks Investment Research
Near-Term Woes for Ford
While Ford’s electric push bodes well for its long-term prospects, it is likely to be a drag on its profits this year. The company anticipates that the full-year loss from the Model e unit will range between $5 billion and $5.5 billion, wider than $4.7 billion in 2023, amid ongoing pricing pressures and increased investments in next-generation EVs.
Additionally, Ford’s warranty and recall costs have been on the rise, reaching $2.3 billion in the second quarter of 2024, up $800 million and $700 million on a sequential and year-over-year basis, respectively. The company has indicated that most warranty issues stem from older models and that it is actively improving the quality of its newer models. However, it may take 12 to 18 months before these efforts begin to reduce warranty costs. Unfortunately, this means that Ford could continue to face elevated warranty expenses for some time.
The Zacks Consensus Estimate for Ford’s 2024 earnings per share (EPS) is $1.88, indicating a 6.5% fall from last year. The consensus mark for 2024 EPS has moved south by 14 cents in the past 60 days.
F Stock Trading Cheap
From a valuation standpoint, Ford appears attractive now. Its forward sales multiple of 0.25 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
Brokers’ Views on Ford
Ford currently has an average brokerage recommendation (ABR) of 2.60 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations made by 20 brokerage firms. Of the 20 recommendations deriving the current ABR, 12 have rated the stock as Hold.
Image Source: Zacks Investment Research
Should You Buy Ford Shares Now?
Ford's strong prospects, particularly in its Ford Pro unit, along with its attractive dividend yield and robust liquidity, position this legacy U.S. automaker for long-term success. As the Fed is expected to lower interest rates soon, this could reignite consumer interest in big-ticket items, potentially benefiting Ford. These factors, combined with the stock's appealing valuation, create a promising outlook for the company.
However, investors should be mindful of near-term challenges. Ford's 2024 profits are expected to be adversely impacted by the underperformance of its Model e unit, and rising warranty costs add another layer of concern. Monitoring Ford’s progress in improving EV profitability and reducing warranty expenses will be key. While potential buyers should consider these factors before placing a bet on Ford now, existing investors will benefit from holding on to the stock for the long term.
Image: Bigstock
Ford to Re-enter India to Boost Exports: Is the Stock Worth Buying?
U.S. auto biggie Ford (F - Free Report) is set to make a comeback in India, two years after shutting down production in the world's third-largest car market. The automaker plans to revive its manufacturing facility in Tamil Nadu, focusing on exports rather than domestic sales. This move aligns with Ford's broader “Ford+ Growth Plan,” which emphasizes global market expansion. Tamil Nadu is home to several car manufacturers, including Hyundai, Nissan (NSANY - Free Report) and Renault (RNLSY - Free Report) . Auto companies like VinFast (VFS - Free Report) and Tata Motors' Jaguar Land Rover division also plan to establish factories in the area to produce electric vehicles (EVs).
Ford's exit from India in 2021 followed years of unprofitability despite a $2 billion investment that failed to compete with dominant Asian rivals. However, this re-entry could signal a fresh opportunity for Ford to leverage its global business operations. The company aims to add up to 3,000 jobs over the next three years in India.
As F embarks on this new chapter in India, investors are left wondering: is Ford stock worth buying now amid its global ambitions and renewed focus on exports? Let’s dive deeper.
Factors to Drive Ford Stock
Ford is banking on its commercial vehicle division, Ford Pro, which continues to see strong demand. The successful launch of the all-new Super Duty and a robust order pipeline has led the firm to increase its 2024 EBIT forecast for Ford Pro unit from $8-$9 billion to $9-$10 billion. This division, encompassing vehicles, software and physical services, is crucial to Ford’s future, with software revenue expected to reach $1 billion by next year, boasting gross margins of more than 50%. By 2026, Ford Pro is projected to contribute 20% of the company’s total EBIT.
In the Ford Blue segment, the company’s iconic models, such as the F-150, Maverick, Bronco, and Mustang, present significant growth opportunities. The new F-150, Ranger, and revamped versions of the Explorer, Expedition and Navigator are set to drive revenue growth, with Ford anticipating improved profitability in the second half of 2024.
Despite near-term challenges for the Ford Model e division, it is positioned for long-term growth, focusing on scaling production, digital manufacturing efficiency and vertical integration. Ford’s popular EVs, including the Mustang Mach-E and F-150 Lightning, will continue to support shipments, with new EV models planned in the coming years.
The company’s strong liquidity position, with around $27 billion in cash, enables ongoing investment in its Ford+ strategy, while a dividend yield exceeding 5% makes it attractive to income-focused investors. Encouragingly, Ford has raised its adjusted free cash flow (FCF) projection for the year by $1 billion to a range of $7.5-$8.5 billion. It targets distributions of 40-50% of FCF going forward, demonstrating its commitment to shareholder return.
Near-Term Woes for Ford
While Ford’s electric push bodes well for its long-term prospects, it is likely to be a drag on its profits this year. The company anticipates that the full-year loss from the Model e unit will range between $5 billion and $5.5 billion, wider than $4.7 billion in 2023, amid ongoing pricing pressures and increased investments in next-generation EVs.
Additionally, Ford’s warranty and recall costs have been on the rise, reaching $2.3 billion in the second quarter of 2024, up $800 million and $700 million on a sequential and year-over-year basis, respectively. The company has indicated that most warranty issues stem from older models and that it is actively improving the quality of its newer models. However, it may take 12 to 18 months before these efforts begin to reduce warranty costs. Unfortunately, this means that Ford could continue to face elevated warranty expenses for some time.
The Zacks Consensus Estimate for Ford’s 2024 earnings per share (EPS) is $1.88, indicating a 6.5% fall from last year. The consensus mark for 2024 EPS has moved south by 14 cents in the past 60 days.
F Stock Trading Cheap
From a valuation standpoint, Ford appears attractive now. Its forward sales multiple of 0.25 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
Brokers’ Views on Ford
Ford currently has an average brokerage recommendation (ABR) of 2.60 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations made by 20 brokerage firms. Of the 20 recommendations deriving the current ABR, 12 have rated the stock as Hold.
Image Source: Zacks Investment Research
Should You Buy Ford Shares Now?
Ford's strong prospects, particularly in its Ford Pro unit, along with its attractive dividend yield and robust liquidity, position this legacy U.S. automaker for long-term success. As the Fed is expected to lower interest rates soon, this could reignite consumer interest in big-ticket items, potentially benefiting Ford. These factors, combined with the stock's appealing valuation, create a promising outlook for the company.
However, investors should be mindful of near-term challenges. Ford's 2024 profits are expected to be adversely impacted by the underperformance of its Model e unit, and rising warranty costs add another layer of concern. Monitoring Ford’s progress in improving EV profitability and reducing warranty expenses will be key. While potential buyers should consider these factors before placing a bet on Ford now, existing investors will benefit from holding on to the stock for the long term.
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.