F - Embedded Expectations Analysis - 2021 08 18
Ford Motor Company (F:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 15.2x Uniform P/E. Even at these levels, the market is pricing in expectations for inflect positively. Although management's concerns about demand for their EVs, growth opportunities in China, and chip availability suggest the potential for near-term headwinds, market expectations are still too pessimistic, and longer-term equity upside remains warranted.Specifically, management may be concerned about the alignment of their capital and HR investments with their EV strategy, the sustainability of demand for their high-volume EVs, and the pace of their Mustang, Transit and F-150 electrification initiatives. Moreover, they may be exaggerating the strength of their business, the potential of the Ford Pro FinSimple service, and the capabilities of their over-the air (OTA) software features. Finally, management may lack confidence in their ability to drive growth in China and may be concerned about the prolonged chip shortage.
Although management's concerns about demand for EVs, growth in China, and chip availability suggest the potential for near-term headwinds, market expectations are too pessimistic given the firm's macro tailwinds and growth strategies, as such, longer-term equity upside remains warranted.
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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