Ford Is Investing For Change — But This Is The Problem That Analysts See
Ford Motor (F) won’t dash hopes when it reports earnings Wednesday, having recently warned investors that its profits for 2017 and 2018 will miss expectations. But Ford managers may not reassure analysts on shortfalls in its electric and autonomous strategy.
For Ford, analysts see EPS growing 47% to 44 cents as revenue edges up 3% to $37.15 billion, according to Zacks Investment Research.
Shares edged up 0.2% to 12.02 in Monday’s stock market trading, following a sharp 9% tumble last week.
That drop in Ford stock — to the lowest level since November — came after the automaker’s preliminary 2017 results and 2018 guidance, provided at the Detroit auto show, underwhelmed investors. The company cited higher commodity prices and currency volatility.
Ford said preliminary 2017 EPS was likely $1.78 vs. the Zacks estimate of $1.81. It’s unclear how much analysts have adjusted their official Q4 estimates as a result.
Ford plans to shake up its production lineup, as consumers continue to forsake passenger cars for big-ticket SUVs and trucks. Automakers also must juggle plans for the vehicles in demand today with plans for the technologies that will shape the future of cars.
Ford is eager to be seen as a leader in emerging auto technologies. It said earlier this month it will more than double its investment in electrified vehicles. It also will test self-driving cars for ride-sharing in a new and unnamed city this quarter. But Ford’s 2021 target for launching a new robotaxi business trails that of rival GM by two years. Moreover, its management has been light to date on details about its autonomous and electric car strategy, and long lead times may mean that changes implemented now won’t produce results until 2019-2020, analysts at RBC Capital Markets say.
“Ford seems to be investing for industry change,” RBC’s Joseph Spak wrote in a Monday note. “However, if the cycle turns or if the secular challenges accelerate, time may not play into Ford’s favor.”
Spak lowered his price target from $14 to $13, but said Ford’s attractive and above-average dividend yield of 5% adds support.
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For Fiat Chrysler, EPS should grow 76% to 67 cents (Zacks does not have revenue).
Fiat Chrysler stock has more than doubled in the past year, on hopes of rising profits and talk of strategic deals, including with China’s Great Wall Motor and South Korea’s Hyundai.
In the Jeep SUV, the Italian-American automaker sees a valuable brand poised to greatly expand its global appeal this year. The Jeep brand is worth more than Fiat Chrysler, a Morgan Stanley analyst said last year, leading to speculation about a spinoff, similar to that of the luxury Ferrari (RACE) sportscar brand in 2015-2016.
Fiat Chrysler joined the self-driving alliance among BMW (BMWYY), Intel (INTC) and Intel’s recently acquired Mobileye unit. Waymo, owned by Alphabet (GOOGL), relies on the Pacifica minivan for its self-driving test fleet.
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