F - Embedded Expectations Analysis - 2021 03 30
Ford Motor Company (F:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 19.5x Uniform P/E. At these levels, markets are pricing in bullish expectations for the firm. Although management's concerns about their commercial vehicle business, business restructuring, and their digitalization initiatives suggest the potential for near-term headwinds, longer-term equity upside remains warrantedSpecifically, management may lack confidence in their ability to digitalize their leading commercial vehicle business, expand in the pure battery EV market, particularly with Ford E-Transit, and successfully restructure underperforming businesses. Furthermore, they may be exaggerating the progress of their AI and machine learning initiatives, their scale advantage in the commercial vehicle market, and their focus on investing in connected vehicle services
Although management's concerns about their commercial vehicle business, business restructuring, and their digitalization initiatives suggest the potential for near-term headwinds, market expectations are far too bearish given the firm's EV initiatives and strong brand, suggesting longer-term equity upside remains warranted for F
Ford Motor designs, manufactures, markets, and services a line of Ford cars, trucks, sport utility vehicles, electrified vehicles, and Lincoln vehicles, as well as provides financial services through its subsidiary, Ford Motor Credit Company LLC. The company is engaged in electrification; mobility solutions, including self-driving services; and connected vehicle services. The company has three operating segments: Automotive, which includes the sale of Ford and Lincoln vehicles, service parts, and accessories; Mobility, which includes its autonomous vehicles and its investment in mobility through Ford Smart Mobility LLC; and Ford Credit, which includes vehicle-related financing and leasing activities.
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