A. Financial analysis.
The following two segments both feature substantial Ford involvement. Sales of Ford and Lincoln vehicles, service parts, and accessories, as well as the expenses incurred in their design, production, distribution, and maintenance, make up the bulk of the Automotive segment. This division’s revenues and expenses reflect our electrification vehicle programs and business connectivity. Business operations in North America, South America, Europe, China, and the International Markets Group make up the regional divisions that make up this segment. Ford’s equity stake in Argo AI and the costs associated with developing autonomous vehicles and related businesses are the primary components of the Mobility segment.
Ford’s short-term financial success hinges on the demand for larger, more lucrative vehicles in the United States. Finally, they decided to redirect investment away from Argo AI’s cutting-edge L4 technology and toward more developed L2/L3 platforms. Ultimately, this is crucial if we want to see widespread, profitable commercialization of L4 autonomy in the future.
Adjusted EBIT is projected to reach about $11.5 billion in 2022, a 15% increase from 2021. The success of the company’s automotive operations and the reorganized operations in markets outside of North America has led to an adjusted free cash flow forecast for the entire year between $9.5 and $10.0 billion.
Their projections are predicated on several factors, including a 10% increase in wholesale shipments year over year, a doubling of earnings in North America, a tripling of profits elsewhere, and a decrease in Ford Credit’s EBT to around $2.7 billion. The following are other assumptions.
- The supply chain must not experience any further breakdowns.
- Orders and interest in our newest products remain high.
- Steady price increases
- Costs of around $9 billion due to increased prices for commodities and general consumer goods.
The critical metric shares include free float, common shares outstanding, market cap, annual dividend, dividend yield, and average volume. The quarterly dividend was solely responsible for the $603 million distributed to shareholders in the third quarter of 2022. In order to mitigate the potentially dilutive impact of share-based compensation, the company announced on October 26, 2022, that it would resume a small anti-dilutive share repurchase program. Up to 35 million shares of Ford Common Stock may be repurchased under the plan.
On October 21, 2022, there were 3,949,642,023 shares of Ford Common Stock and 70,852,076 shares of Ford Class B Stock outstanding. Additionally, the joint stock net for Ford Motor Company for the quarter ending September 30, 2022, was $0.042B, an increase of 2.44% from the same period in the prior year. According to Ford, progress made in Q3 2022 will pave the way for a successful conclusion to a challenging year, and a strategically swift beginning to 2023 as the automaker realigns its operations around three customer-focused automotive business units. All equity securities held on December 31, 2021, had a net unrealized gain of $8.3 billion. Also, all equity securities held on September 30, 2022, had an unrealized loss of $1.8 billion.
The current ratio (CR).
CR = Current Assets / Current Liabilities.
CR as at Dec 31 2021 = 108996/90727 = 1.2014
CR as at Sep 30 2022 = 108088/90167 = 1.1988
When Ford’s short-term assets exceed its short-term liabilities, the company can better meet its financial obligations, as measured by the current ratio. The current ratio for Ford Motor Company was 1.20 as of September 30, 2022. (Gurufocus, 2023).
The profit margin (PM).
Net PM = (Revenue – cost) / revenue
Net PM as of September 30, 2021. = (35683 – 34341) / 35683 = 0.0376
Net PM as of September 30, 2022. = (39392 – 38888) / 39392 = 0.0128
Ford makes less money off each unit sold due to the declined profit margin. It can happen if the selling price is too low, the production costs are too high, or both. Gross profits in the income statement will fall if total sales do not rise to compensate. Macrotrends (2023) reports that as of September 30, 2022, Ford Motor’s operating profit margin is 4.36%.
B. Discussion of risks.
Ford’s supply chain crisis illustrates one of the most significant threats currently confronting the manufacturing industry. Market Risk, as well as Funding Risk and Liquidity Risk, are two other types of risk. Ford faces global market risks in the ordinary course of business, such as the impact of fluctuations in the value of currencies, the cost of certain commodities, and interest rates. They use highly efficient derivative contracts to mitigate these threats.
Ford’s International Markets Group saw a 30% year-over-year increase in wholesales in the third quarter of 2022, thanks mainly to the success of the new Ranger and Everest. Higher wholesale and net pricing, along with a more advantageous mix, helped drive a 47% increase in revenue in Q3 2022, offsetting some of the adverse effects of a decline in foreign exchange rates.
Ford’s EPS (diluted) decreased from $0.45 in 2021 to $0.21 in the third quarter of 2022. Ford’s diluted loss per share of Common and Class B Stock in the third quarter of 2022 was $0.21, while their adjusted loss per share was $0.30. A yearly decline of 2.30 percent was also typical. For the quarter ending in the third quarter of 2022, the Dividend Payout Ratio at Ford Motor Co. was 0.00.
C. Discussion of Ford’s capital structure
Ford had 3,949,642,023 shares of Common Stock and 70,852,076 shares of Class B Stock issued and outstanding as of October 21, 2022. Earnings Per Share (EPS) details the steps required to compute both the primary and diluted EPS. When the weighted average number of ordinary shares outstanding is used when determining Basic EPS, the weighted average number of ordinary shares outstanding is used. They are potentially dilutive common shares in diluted EPS if they meet specific criteria.
Debt/equity ratio
Debt to Equity Ratio = (long-term debt + short-term debt + fixed payment obligations) / Shareholders’ Equity.
D/E = (84,279)/ 42,100 = 2.00.
An increase of 14.67 percent annually was recorded in Ford Motor Company’s stockholder equity as of September 30, 2022, totaling $42.089 billion (Macrotrend, 2023). With a debt-to-equity ratio of 2, Ford uses debt financing for twice as much as its equity financing or twice as much money as it has in its possession.
EPS
EPS = (Net income – preferred dividends) ÷ weighted average of common shares outstanding during the period.
EPS = (930 – 1410) / 4021 = 0.1049
The $-3.025B in dividends paid out on Ford Motor common and preferred stock in the twelve months ending September 30, 2022, represented a 400% increase over the prior year. The total annual dividends paid out by Ford Motor in 2021, including those on common and preferred stock, were $-0.403B, down 32.38 percent from the previous year.
Return on investment
21% = 8.9 ÷ 42
It is possible to earn a 20% return, but that is a sizable amount. One will need to take chances on volatile investments or put significantly more time into safer investments. In 2021, Ford stock rose by 136% as investors applauded the automaker’s plans to release new electric vehicles. Ford stock worsened in 2022, falling by 44%. It is partly due to the expected increase in 2021 and equal measure to the underwhelming performance of the stock market in light of the state of the global economy. However, Ford is preparing for the future (Q.ai, 2022). However, Ford is preparing for the future (Q.ai, 2022). Moreover, Forward Industries Inc.’s (FORD) WACC is 6%.
Ford’s weighted average cost of capital
WACC Formula = [Cost of Equity * % of Equity] + [Cost of Debt * % of Debt * (1-Tax Rate)].
Ford Motor Company (F) has a WACC of 7.4 percent. Forward Industries, Inc. (FORD) also has a WACC of 6.6%.
D. Discussion of Free Cash Flow.
Free cash flow= operating cash flow – capital expenditure =
Operating cash flow = -439,000,000.
Capital expenditure = 38,888,000,000.
FCF = -439,000,000 – 38,888,000,000 = -39327000000.
As a result of this negative cash-free cash flow, investors anticipate a decline in the stock price over the next three months. From here, we predict a gradual decline of around 5-6% per year, amounting to a 20% correction from the current level. Given the history of the stock over the past five years, we have arrived at a price projection of 12.11*(1-0.2) = $9.866 or $10.
Ford Motors maximizes shareholder wealth by examining profitability and other financial ratios. Investments that generate a profit are of greater interest to financiers. Looking at Ford Motors’ quarterly returns for 2022, the company’s net income increased to $0.11 per share, inspiring confidence among investors. The $84.279B in long-term debt owed by Ford Motor Company as of the fiscal quarter ending September 30, 2022, represents a decrease of 13.34% year over year. Ford Company’s net income and revenue margin have been rising dramatically, making the company more appealing to investors.
Since the company’s debt decreased from $ 38.274 billion to $ 38.121 billion in the most recent quarter, the balance sheet is in good health, and the company is making progress toward its goal of maximizing shareholder value. Though Ford Motors has been losing money for quite some time, the company has assured its shareholders of healthy returns. It has also been meeting those expectations since 2022. The average price target for Ford Motor Company over the next 12 months is $16.03, according to estimates from 15 different analysts. The average price target is $17.00, a gain of 26.32 percent from the previous trading day’s closing price of $12.69.
There is a wide variety of tools available to help people make informed investment choices. To provide a complete and up-to-date analysis of the company’s performance, such metrics must accurately reflect all the information about the company that any reasonable investor can use. Other relevant measures for the company, such as its ability to pay back its debt, would be used to arrive at a proper investment analysis for any rational investor. Asset turnover is a concept I can use. Internally, this metric assesses how well the business is monetizing its resources. Simple to calculate by dividing the company’s revue by its total assets, this measure is helpful.
E. An investment recommendation.
Ford Company has been the subject of many studies and articles. Despite being the fifth largest automaker in the world, its stock has not been performing well. The company has been trending upward for the past few quarters, leading to a shift in perception. Hence, it is now seen as one of the companies with the best investment options. The company’s stock price is near its all-time high, and analysts expect it to keep increasing. At its current price of $12.84, Ford Motor Company stock is exhibiting a bullish price movement. Simple moving averages allow us to conduct additional research into the company’s stock prices and future projections. Using the 50-day (Pink), 100-day (Blue), and 200-day (Yellow) moving averages, Ford Motor Company’s share price is currently trading above its key averages, indicating a bullish trend. Because of this, investors have shown significant interest in purchasing company shares. Any sane investor would be wise to take advantage of this trend, as it strongly correlates with the company’s revenue growth rate and investor return on investment.
Conclusion
Any reasonable investor would do well to put their money into Ford Motor Company. The company will continue to improve due to the recent uptick in stock prices and capital gains. Any sane investor can rest assured that dividends will be paid out of Ford Motor Company thanks to its ability to pay them out of its profits. Ford stock is often looked down upon as a poor candidate for capital gains but is a solid addition to a conservative investment portfolio. That is excellent news for the 35-year-old who wanted to invest in the company but did not feel confident enough to do so. This investor would be well-served to put some of his money into Ford Motors, and we urge him to be cautious about doing so.
F. References
Gurufocus. (2023, January 10). F Current Ratio | Ford Motor Co – GuruFocus.com. Retrieved from www.gurufocus.com website: https://www.gurufocus.com/term/current_ratio/NYSE:F/Current-Ratio/Ford-Motor
Macrotrend. (2023, January 10). Ford Motor Share Holder Equity 2010-2022 | F. Retrieved January 10, 2023, from www.macrotrends.net website: https://www.macrotrends.net/stocks/charts/F/ford-motor/total-share-holder-equity#:~:text=Ford%20Motor%20share%20holder%20equity%20for%20the%20quarter%20ending%20September
Macrotrends. (2023, January 10). Ford Motor Operating Margin 2010-2022 | F. Retrieved January 10, 2023, from www.macrotrends.net website: https://www.macrotrends.net/stocks/charts/F/ford-motor/operating-margin#:~:text=Current%20and%20historical%20operating%20margin
Q.ai. (2022, October 22). Ford Stock Analysis: Is Ford A Profitable Company In 2022? Retrieved January 10, 2023, from Forbes website: https://www.forbes.com/sites/qai/2022/10/22/ford-stock-analysis-is-ford-a-profitable-company-in-2022/?sh=c2a67c61efbc
SEC. (2022, October 27). Quarterly report under section 13 or 15(d) of the securities exchange act of 1934: Ford motor company. Retrieved from www.sec.gov website: https://www.sec.gov/ix?doc=/Archives/edgar/data/37996/000003799622000073/f-20220930.htm
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