Ford Motor Company [F]
0.64%
$
10.25 Exchange: NYSE Sector: Consumer Cyclical Industry: Auto Manufacturers
Q1 2024 ReportPublished: Apr 25, 2024
Earnings Highlights
Revenue of $42.78B up 3.1% year-over-year
EPS of $0.33 decreased by 25% from previous year
Gross margin of 8.7%
Net income of 1.33B
"Jim Farley: "We’re progressively shedding behaviors that have weighed down performance and valuation of legacy auto companies for most of the industry's history."" - Jim Farley
Ford Motor Company (F) QQ1 2024 Results: Strong Revenue Growth Amid Electric Vehicle Challenges
Executive Summary
In Q1 2024, Ford Motor Company reported a revenue of $42.8 billion, reflecting a 3% year-over-year growth. However, challenges in profitability were evident with a net income of $1.332 billion, down 24% from the previous year, alongside rising costs primarily driven by investments in the Ford Pro business segment meant to bolster growth. Management underscored their commitment to creating a more resilient business model through the Ford+ strategy while addressing the need for improved profitability, particularly within their electric vehicle segment. Key highlights included growth in Ford Pro revenue by 36% and a 21% increase in wholesales, indicating strong performance in commercial vehicles despite pressure on the Model e segment from pricing strategies in a competitive EV market.
Key Performance Indicators
Revenue
42.78B
QoQ: -6.93% | YoY:3.14%
Gross Profit
3.72B
8.71% margin
QoQ: 47.19% | YoY:-19.38%
Operating Income
1.26B
QoQ: -614.29% | YoY:-40.37%
Net Income
1.33B
QoQ: -353.23% | YoY:-24.19%
EPS
0.33
QoQ: -353.85% | YoY:-25.00%
Revenue Trend
Margin Analysis
Key Insights
**Revenue**: $42.8 billion (YoY up 3.14%, QoQ down 6.93%)
**Net Income**: $1.332 billion (YoY down 24.19%, QoQ down 353.23%)
**EPS**: $0.33 (YoY down 25.00%, QoQ down 353.85%)
**EBIT Margin**: 6.5%, reflecting a growing contribution from Ford Pro.
**Cash and Cash Equivalents**: $19.72 billion, ensuring liquidity for future investments.
Financial Highlights
- Revenue: $42.8 billion (YoY up 3.14%, QoQ down 6.93%)
- Net Income: $1.332 billion (YoY down 24.19%, QoQ down 353.23%)
- EPS: $0.33 (YoY down 25.00%, QoQ down 353.85%)
- EBIT Margin: 6.5%, reflecting a growing contribution from Ford Pro.
- Cash and Cash Equivalents: $19.72 billion, ensuring liquidity for future investments.
- Free Cash Flow: $(709) million, indicating a need to optimize working capital and reduce inventory costs.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
42.78B
3.14%
-6.93%
Gross Profit
3.72B
-19.38%
47.19%
Operating Income
1.26B
-40.37%
-614.29%
Net Income
1.33B
-24.19%
-353.23%
EPS
0.33
-25.00%
-353.85%
Key Financial Ratios
currentRatio
1.17
grossProfitMargin
8.71%
operatingProfitMargin
2.95%
netProfitMargin
3.11%
returnOnAssets
0.49%
returnOnEquity
3.11%
debtEquityRatio
3.53
operatingCashFlowPerShare
$0.35
freeCashFlowPerShare
$-0.18
dividendPayoutRatio
99.5%
priceToBookRatio
1.23
priceEarningsRatio
9.93
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Management highlighted several key areas during the earnings call:
1. Growth Drivers Transforming: CEO Jim Farley mentioned, "The cornerstone of Ford+ is pretty straightforward, a more resilient business model, higher growth, higher margin, and more capital efficiency" illustrating a shift in the company towards more profitable avenues despite challenges.
2. Ford Pro Strength: Farley stated, "Ford Pro delivered a 36% increase in revenue on a 21% increase in wholesales" emphasizing the robust demand for commercial vehicles which positions Ford well in the market.
3. Electrification Strategy: Farley noted, "We are expected to spend about $10 billion as a company. We’ve now guided $8 billion to $9 billion" reinforcing the company's pragmatic approach to EV expansion as they adapt to market demands.
Jim Farley: "We’re progressively shedding behaviors that have weighed down performance and valuation of legacy auto companies for most of the industry's history."
— Jim Farley
John Lawler: "We expect every one of our EVs to make money in the first 12 months. That is a very disciplined process."
— John Lawler
Forward Guidance
Ford management remains optimistic about its outlook for 2024, projecting adjusted EBIT between $10 billion and $12 billion and adjusted free cash flow between $6.5 billion and $7.5 billion. This positive sentiment is backed by expectations for strong demand for their refreshed Super Duty lineup and transitioning cost efficiencies as they refine product launches. They anticipate potential challenges due to industry pricing pressures, specifically mentioning a projected 2% decrease in overall automotive prices due to incentive spending. Management stresses cash flow conversion targets in the range of 50% to 60%, which will allow for sustained shareholder returns while investing in growth opportunities.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
F Focus
8.71%
2.95%
3.11%
9.93%
RIVN
-43.80%
-1.23%
-17.90%
-1.88%
TM
20.50%
11.10%
3.73%
8.29%
LCID
-1.34%
-4.23%
-14.40%
-2.42%
XPEV
12.90%
-25.10%
-3.89%
-9.64%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Overall, Ford presents a mixed investment outlook. While maintaining strong revenue growth and significant liquidity, the decline in profits from electric vehicle investments poses a threat. However, strengths in the commercial vehicle sectors and robust management strategies provide a counterbalance. Investors should monitor the developments in the Ford Pro business and how effectively the company adjusts its EV strategy in light of ongoing industry pressures.
Key Investment Factors
Growth Potential
Ford is well-positioned in the commercial vehicle sector with Ford Pro growing robustly. Their strategy to refine product launches and tap into new growth areas in software and services highlights potential for higher margins in future.
Profitability Risk
The primary risk is centered around the Model e segment facing substantial losses and pressures from EV pricing. The ongoing need for capital investment in an increasingly competitive EV landscape could strain Ford's financials further if not managed effectively.
Financial Position
Ford's balance sheet shows substantial liquidity with $25 billion in cash and $43 billion in total liquidity, supporting further investments and operational flexibility. The company must navigate challenges posed by rising R&D and manufacturing costs.
SWOT Analysis
Strengths
Strong revenue growth in Ford Pro, reflecting a solid commercial vehicle market position.
Management's disciplined approach to profitability in EV segments.
Significant liquidity to leverage for future growth and investment.
Weaknesses
Decrease in net income and EPS signals challenges in overall profitability.
Dependence on EV transition that has so far shown considerable losses.
Opportunities
Growth in software and services linked to Ford Pro, allowing for sustainable income streams.
Potential to leverage new EV technologies to improve margin profiles in the mid to long term.
Threats
Intensifying competition in the EV market, particularly from established players and new entrants.
Volatility in raw material costs affecting the EV segment's profitability.