Ford's earnings showed that the car manufacturer's risky games pay off – and investors buy in
Shares of the second-largest automaker on Friday rose past the $ 10 mark for the first time since August. The stock, which has a market capitalization of $ 41.5 billion, rose more than 10% on Friday and logged its best performance since April 24, 2009. The increase is capped by a seven-week stretch of weekly gains that have increased the shares 23.6 %
<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The shocking thing is the move came despite A 34% decrease in the first quarter net income what was probably more important to investors was that Ford's adjusted profits hit 44 cents per share, well over the 27 percent of analysts asked by Refinitive. = "24"> The shocking thing is the move came despite a 34% decline in the first quarter net income, what was probably more for investors was that Ford's adjusted profits hit 44 cents per share, well over the 27 percent of the analysts that were asked by Refinitiv.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm "type =" text "content =" "Our results … signal positive momentum for Ford," said CEO Jim Hackett during a conference call with analysts and media, adding that "we have a solid plan to create value in the near and long term." "data-reactid =" 25 ">" Our results … signal positive momentum for Ford, "said CEO Jim Hackett during a conference call with analysts and media, adding that" we have a solid plan to create value close and long term. "
That's something Hackett has said for almost two years, almost from the moment he was appointed to replace CEO Mark Fields in May 2017 management shake-up. The question is why are analysts finally taken him seriously now – especially with Ford's senior CFO Bob Shanks, and warn those on the call that the automaker is facing a "volatile environment with very strong competition."
In fact, look closely at the First Quarter figures show that while Ford has had one Good development in its North American company margins climbed it almost to a full point, to 8.7%, facing significant problems in every other key market, from Europe to China.
While "there is still some skepticism remaining r, "says Morningstar's auto analyst David Whiston," the feeling has improved. "
Whiston, currently considering Ford a purchase, points to several positive factors, including the cuts that are now underway in Europe and South America, which should help profit in the future and a broad product rollout that can excite new buyers
<p class = "canvas-textile-textile Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "It seems in the west is for end cheering the risky games Ford does to shift away from sedans and invest in new technology. And it comes at a time when the market grows more cautiously with competitors Tesla, who saw a sharp sale after revenue. The result: Ford's market capitalization is now greater than Tesla for the first time since April 2017 . "Data Reaction =" 30 "> It seems investors are finally giving rise to the risky rates Ford is making to shift from sedans and investing in new technology, and it comes at a time when the market is growing more cautiously with its competitors Tesla , which saw a sharp sales value after earnings.The result: Ford's market capitalization is now bigger than Tesla is for the first time since April 2017.
New cars that hit the market
<p class = "canvas component textile Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm "type =" text "content =" This month's New York International Auto Show brought to the spotlight Lincoln Corsair – the latest in a procession of new products with a view to reviving Ford's long-running Lincoln brand. Crossover joins Nautilus, a medium-sized CUV that was launched at the beginning of the 2019 model year and the big Aviator, which will be rolled into showrooms later this year. For the flagship "Blue Oval" brand, Ford has updated Explorer, Edge and also for New York, Escape, the second-best-selling brand name. "Data-React =" 32 "> This month, the New York International Auto Show was brought to the spotlight Lincoln Corsair – the latest in a procession of new products designed to revive Ford's long-running Lincoln brand. medium-sized CUV that started in the early 2019 model year, and the big Aviator, which is set to roll into showrooms later this year. For the flagship "Blue Oval", Ford has updated Explorer, Edge and also for New York, Escape, nest
At the same time, it brings back to life the medium-sized Ranger pickup and prepares the return of the Bronco SUV in the coming years.
"It's about trucks," said Whiston.
The backup is sales data, which shows Ford's utility vehicle and, in particular, its best-selling F-series pickup line is propping up t The company's balance sheet.
And that corporate leaders insisted during the conference call Thursday, provides solid justification for the controversial b the slogan of phasing out almost all of its sedans and coupes. (Mustang is the only notable exception on the Ford Brand site.)
The product's offense is not limited to the North American market, noted Jim Farley, who this month named Ford's new business, technology, and strategy president. In the Chinese market, Ford is in the midst of refreshing or a total of 30 cars in its line over three years.
More losses in China
China will maintain at least some passenger car models like the big Lincoln Continental, the Luxembourg president's president, Joy Falotico, told CNBC last week, reflecting regional taste. But even though Ford is shifting more and more towards a truck-based line-up. The new Lincoln Aviator, the company's officials listed during a news conference in New York last week, will be built in both the US and China.
<p class = "canvas-textile textile Mb (1.0em) Mb 0) – sm Mt (0.8em) – sm" type = "text" content = " Ford clearly needs a lift in what has become the world's largest motor vehicle market sales doubled there by 40% last year, it went to a relatively late start in China, expecting years to make a serious investment that ceded domination of General Motors ( GM) and German giant Volkswagen. "Data-reactid =" 40 "> Ford clearly needs a boost in what has become the world's largest motor vehicle market, and sales double by 40% last year. It went to a relatively late start in China, and waited years to make a serious investment that sank domination to cross-rival General Motors (GM) and German giant Volkswagen.
Despite some speed coming with the Chinese launch of the Lincoln brand, Ford continues to struggle. Sales were further reduced during the first quarter, although the automaker was able to reduce market losses to $ 28 million from $ 150 million a year ago. But even there, a favorable exchange rate exchange played an important role as ongoing cost-saving efforts.
Plans for Latin America
<p class = "canvas-textile Mb (1.0em) Mb 0) – sm Mt (0.8em) – sm" type = "text" content = "Cost saving is clearly the name of the game for Ford, especially in two other troubled markets.As part of a broad global transition, the automaker announced in February plans to abandon the heavily commercial trucking business in Latin America closing a plant in San Bernardo , Brazil that had once been among the largest in the region. But last year, the factory produced only 33,000 trucks, or barely 11 per worker, an unsustainable formula. "Data-response time =" 45 "> Cost savings are clearly the name of the game for Ford , especially in two other troubled markets. As part of a broad global restructuring, the automaker announced in February that it would abandon the heavily commercial trucking business in Latin America and close a factory in San Bernardo, Brazil that had once been one of the largest in the region. But last year, the factory produced only 33,000 trucks, or just under 11 per worker, an unsustainable formula.
There has been widespread speculation that Ford could move to leave Latin America altogether. Ford officials refused to directly address plans for this market, but Hackett said the company "accelerated" its efforts to solve problems in South America, as well as Russia and Europe – the latter market providing a small but promising first quarter.
How far Ford will go on the three markets is likely to remain speculation for some time, especially as analysts compare what it does with its competitor GM. Since Mary Barra was appointed CEO in 2014, GM has reversed a hundred-year growth strategy by closing money-losing operations in Russia and South Africa and selling its European subsidiary Opel.
Ford does not seem to rule out any alternatives – not considering the features it has made on the alliance front.
In January, car manufacturers confirmed months of rumors by announcing plans to work with VW to develop and build light vehicles for overseas markets. It also confirmed that the two former competitors are discussing a number of other opportunities, including ways to collaborate on the development of both electrified and autonomous vehicles. During the Thursday conference, Shanks called these discussions "go very well", even though he did not set a target date to advertise any other joint ventures.
"Ford's exit from unprofitable businesses – mainly cars – and cost savings to focus on commercial trucks abroad, show that the more effective strategy for bringing Europe and China to sustainable EBIT and North America is 10% pretax margin, says Kevin Tynan, auto analyst, Bloomberg Intelligence.
While the Volkswagen talks, Ford has gained most of its attention, Ford has also expanded its ties to one of India's largest homegrown auto companies, Mahindra & Mahindra. "Developing a medium-sized SUV for emerging markets and a small electric vehicle."
"Listening to our customers and incorporating their future needs is the core principle of this collaboration," Farley said. "With utility vehicles and electrification as key focus areas, we are happy to see the progress our two companies have made. "
While Ford officials have refused to comment, there has been widespread speculation on the fact that the car manufacturer could eventually return to several key markets, possibly allowing Mahindra to play lead in India and Volkswagen taking on a similar role in South America.
Silicon Valley Speed
Whether that will happen, Ford seems to see two regions as the key to its future growth: China and North America.
Even in the home market, it is enough to do, Joe Hinrichs, who this month was appointed president of Ford's automotive industry, said. The decision to focus on the light truck market is one of the main steps, but Ford must push for greater efficiency, Hinrich's stress. One of the ways in which the automaker hopes to do so, he explained, "by merging the organization … removing layers of bureaucracy."
This month's management adjustment will help to do so, he added. Ford has traditionally operated with many corporate chimneys, or fiefdoms. One goal is to reduce the number of meetings and increase the decision-making process, explains Hinrichs.
The company also hopes to become more handsome by learning from some of its partners, including the Rivian. Ford invested $ 500 million in Detroit-based battery-powered vehicles starting this week. The Alliance will allow Ford to use Rivian's skateboard-like platform for at least one, and probably more, future products.
"We learn a lot from this wonderful company and their fresh approach," Hackett said, especially when it comes to operating at Silicon Valley speeds.
For his part, Rian's CEO RJ Scaringe expects his own team to learn about large-scale production from the company that invented the moving assembly line.
<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) – sm Mt Ford plans to invest in Rivian come on top of another $ 11 billion as last year would Used to begin electrifying his line-up, Ford was an early pioneer in battery propulsion, but has fallen behind competitors like Tesla (TSLA) as well as GM and VW. long-distance electric car – a high-performance crossover influenced by Mustang – next year. "$ 500 million Ford plans to invest in Rivian comes on top of another $ 11 billion that it said last year would be used to start electrifying its line. -up. Ford was an early pioneer in battery propulsion, but has fallen behind competitors like Tesla (TSLA) as well as GM and VW. It will only start its first long distance electric car – a high performance crossover affected by Mustang – next year.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – Ford (0.8em) – sm" type = "text" content = "Ford has also hit its expenses on self-propelled car technology It invested, among other things, $ 1 billion in Argo AI, with its launch, Ford's autonomous program is now considered one of the most advanced in the industry, according to Navigant Research, behind only such leaders as Alfons (GOOGL) Waymo and GM's Cruise Automation. "Data-response time =" 62 "> Ford has also hit its spending on self-propelled car technology. Among other things, it invested $ 1 billion in Argo AI. Starting up, Ford's autonomous program is now considered one of the most advanced in the industry, according to Navigant Research. It's just behind such leaders as the alphabet (GOOGL) Waymo and GM's Cruise Automation.
Essentially, Ford rages up the number of places it tests self-propelled prototypes, noted Farley during Thursday's earnings call. While places like Phoenix and Silicon Valley have become shallow for most people working with autonomous technology, Ford has chosen locations with challenging weather and traffic conditions that push technology to its limits.
"We choose cities like Miami (and Washington, DC) that are very complex," says Farley.
One of the concerns that nagged analysts and investors has been how Ford – or some of its competitors – will make money and Losing battery and autonomous vehicle programs to profit centers is what the latest management adjustment is supposed to address, said Hinrichs in an interview, the changes will allow it to focus on what it can do to make money now, while developing the businesses it will need in the future.
High Water Mark
But it is far from certain what Ford's balance will look like in the mid-way, Shanks, in his last earnings call, was dull in warning that the first quarter results could prove to be Be Ford's strongest in the current year.
There are clear signs that the US's new vehicle market is weakening LMC Automotive, among other things, estimates that volume will fall somewhere between 16.6 million and 16 , 8 million from just over 17.2 million in 2018. Ford will probably face an even bigger decline, Shanks said, as it will have a lot of downtime in the factory as it switches to the many new models.
That said, "things will only get better" as the new products begin to flow into showrooms, says Jeremy Acevedo, head of industrial analysis for Edmunds. If the launch of the new Aviator and Corsair goes well, "he added," Lincoln can be this year's surprising comeback story. "
Ford's share has increased by 36% since the beginning of 2019, and it is still far from the peaks it set in the early decade when it was hailed as the only Detroit automaker who did not file for bankruptcy. The enthusiasm continues, is far from certain, Ford has many challenges to deal with, but as it puts out its new strategy, investors seem to be on the right track.
