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Carmaker Ford Motor Company (NYSE: F ) has been on a reorganization drive for some time, aiming to better align its business with the fast-changing auto industry. Focus on re-examining the company’s legacy business and streamlining operations through initiatives like leadership changes, entitlements, and disciplined capital allocation.
Last week, Ford shares rebounded from their latest decline but continued to trade below their long-term averages. ‘F’ is a relatively cheap stock that experiences significant fluctuations. It offers a good dividend yield that exceeds the average of the S&P 500. As such, the stock is a favorite among income investors, especially after the recent dividend increase.
Savings
The weak sentiment surrounding the stock will not change until there is a significant improvement in the company’s sales performance and margins. With a cautious outlook on the business amid production delays and negative reviews from a section of analysts, 2023 will be a mixed year for the company. When it comes to owning stocks, there are not many positive factors to consider except the low price.
Meanwhile, the company has delivered stable sales and earnings performance after returning to profitability from losses caused by the virus more than two years ago. Also, it ended fiscal 2022 with $9.1 billion in free cash flow, which came as a surprise to many. However, management’s guidance indicates a decline in free cash flow this year, a prediction that does not match the company’s capital allocation plan.
Roadblocks?
Lately, Ford has been having trouble with its electric vehicle business, and the company has been forced to cut thousands of jobs. Recently, it had to stop production of the F-150 Lightning pickup – a model that was well received by customers after its launch – due to problems related to the battery. It has come as a setback for “Ford +”, a plan laid down by the company with the goal of becoming a leader in digital electric vehicles. Management is bullish on it Ford Blue Kab used-vehicle program and Ford Pro Kaba set of business productivity tools designed for complete fleet management.
“Ford is a different company now, we’re all building a stronger customer focus business that produces sustainable, profitable growth and returns above the cost of capital. While the results of 2022 fell short of my expectations, I have never been more excited about the future, because we have the right plan, the right structure for success, the best team on the field, and real strategic clarity. This year is about execution. It’s time for us to deliver and we will with relentless attention to our founding principle, drift, and growth, and we have reached the ground,” said CEO James Farley on the Q4 earnings call.
Key Number
In the last three months of fiscal 2022, sales increased in all geographic segments except China where the economy experienced a slowdown due to the resurgence of COVID-19 cases. Total revenue rose 17% from last year to $44 billion, which was largely in line with market projections. As a result, adjusted earnings nearly doubled to $0.51 per share but fell short of expectations, marking the second consecutive miss after a consistent beat for several quarters. The company expects adjusted free cash flow to be $6 billion and capital expenditures between $8 billion and $9 billion in fiscal 2023.
After a weak start to the session, Ford shares gained momentum and traded higher on Friday afternoon. It is down 25% from twelve months ago.
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