Unveiling Ford’s Hidden Gem: Shedding Light on an Overlooked Aspect of the Business
Ford Motor Co. has once again caught the attention of investors and analysts alike with its impressive quarterly earnings beat. While many are focused on the carmaker’s above-expectations 2024 guidance, a hidden gem within the company has emerged as a standout performer – Ford Pro.
Ford Pro, Ford’s unit that deals with fleets and commercial customers, has been dubbed the “hidden gem within Ford” by UBS analyst Joseph Spak. This sentiment is echoed by several other analysts who recognize the unit’s potential for success.
In its recent guidance, Ford projected earnings before interest and taxation of $8 billion to $9 billion from Ford Pro. This signifies the importance and profitability of this division. In contrast, the company anticipated earnings of about $7 billion to $7.5 billion from Ford Blue, its unit focused on traditionally powered vehicles. Additionally, Ford projected another loss for Model E, its EV unit, totaling $5.0 billion to $5.5 billion.
Ford Pro’s fourth-quarter revenue saw a significant increase of 11% year-on-year, showcasing its strong performance within the industry. On the other hand, Ford Blue’s revenue remained flat, while Model E’s revenue rose by 4%, falling short of consensus expectations.
Analysts are quick to highlight the potential of Ford Pro, with RBC analyst Tom Narayan stating that it is “one of the best businesses in all of autos.” This recognition comes as Ford reported fourth-quarter earnings that surpassed Wall Street expectations and announced a special dividend. Furthermore, the company revealed plans to launch a next-generation EV to rival Tesla’s future “Model 2.”
Despite the positive financial snapshot, there remains some caution among analysts. Of the 24 analysts covering Ford and polled by FactSet, 11 have a hold rating on the stock, while nine rate it as a buy, and the remaining four rate it as a sell. However, with the favorable post-earnings stock reaction and growing confidence in Ford’s execution, consensus estimates are expected to rise.
It is worth noting that Ford Pro is being hailed as Ford’s “Ferrari” or its most valuable asset. However, there is uncertainty regarding how long the unit can continue funding losses in Ford’s vertically integrated EV strategy, according to Adam Jonas at Morgan Stanley.
Over the past 12 months, shares of Ford have experienced a decline of about 7%. In contrast, the S&P 500 index has seen gains of around 20%. This performance disparity highlights the need for Ford to continue capitalizing on its hidden gem, Ford Pro, to drive its stock value and regain investor confidence.
In conclusion, Ford Pro has emerged as a standout division within Ford Motor Co. Its impressive performance and potential for success have caught the attention of analysts. Despite some caution among investors, there is optimism that Ford’s stock value will rise as confidence in the company’s execution grows. With its hidden gem in tow, Ford has the potential to shine brighter in the automotive industry.
