Citi Starts Coverage on Ford
Citi analyst Michael Ward initiated coverage on Ford, with a ‘Neutral rating’ and $10 price target.
“Stock range-bound over the last three years
Uneven production relative to plan in North America, increases in warranty accruals, and heavy losses with battery electric vehicle production are a few of the factors limiting the stock’s performance.
Guidance will likely be pulled until more tariff-related clarity is available.
In North America, 1Q earnings will be adversely affected by a changeover at key production facilities and the current tariff outline could reduce performance by $2-3 billion.
Yield support
The current dividend yield of 6.2% provides downside support and the company has paid a year-end extra in each of the last three years.
At the beginning of February there were 70.9 million B-shares outstanding, or 1.8% of total shares outstanding.
The Class B shares can only be owned by Ford Family members and the shares control 40% of the vote.
In our view, dividend income is the preferred capital allocation by the Family.
Ford has struggled with key products
Delayed launches, uneven schedules and quality have been a problem over the last few years with key products in North America.
Pretax income from global auto operations totaled $9.2 billion in 2024 down from $10.0 billion in 2023, and our forecast is for income of $5.7 billion in 2025.
Positives
Ford’s automotive balance sheet ended 2024 with a net cash balance of $7.7 billion, we expect the company to generate surplus operating cash of $3.4 billion in 2025 and $4.9 billion in 2026.
Ford Credit is expected to contribute $2 billion in pretax income and Ford’s most profitable segment, Ford Pro, is the market leader in commercial trucks in North America.
Ford is currently valued at 3.5x expected 2025 results on an EV/EBITDA basis, in line with our targeted range.”
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