Ford Motor (F) announced Wednesday that it is shifting its electric vehicle (EV) strategy to deliver profitable and capital-efficient growth, including offering a wider range of electrification options at lower prices and increasing ranges. Wall Street is embracing the news, sending Ford's stock higher in intraday trading.
Ford's plan includes delaying the production of its all-electric pickup truck to the second half of 2027. It was initially expected to begin production next year.
The company is also canceling plans for its three-row sports utility vehicle (SUV), and instead prioritizing hybrid models and electric commercial vehicles, according to CNBC. Ford will incur a special non-cash charge of about $400 million due to the adjusted plans, which may also result in additional expenses and cash expenditures of up to $1.5 billion.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The automaker also said it would realign its U.S. battery sourcing to reduce costs and boost capacity for current and future production. "An affordable electric vehicle starts with an affordable battery," said Ford CEO Jim Farley in a statement. "If you are not competitive on battery cost, you are not competitive."
"We're committed to creating long-term value by building a competitive and profitable business," said Ford Chief Financial Officer John Lawler. "With pricing and margin compression, we've made the decision to adjust our product and technology roadmap and industrial footprint to meet our goal of reaching positive EBIT [earnings before interest and taxes] within the first 12 months of launch for all new models."
Is Ford stock a buy, sell or hold?
Ford Motor has underperformed on the price charts in 2024, down more than 4% on a total return basis (price change plus dividends) vs a 30% return for the S&P 500. This has Wall Street sitting on the sidelines when it comes to the consumer discretionary stock.
True, the average price target among the 26 analysts following F stock tracked by S&P Global Market Intelligence is $13.43, representing implied upside of about 24% to current levels. However, the consensus recommendation is a Hold.
"We believe the market still lacks faith in Ford's EV and software strategy, which compounds the higher cash balance and lack of higher cash returns issue as investors are concerned about the return they will see on that cash," says UBS Global Research analyst Joseph Spak (Neutral, the equivalent of Hold). While the analyst believes electrification is where the market is headed over the intermediate term, investors are currently seeking profits from internal combustion engine (ICE) vehicles.
However, there are some bulls in Ford's corner. Financial services firm BofA Securities, for instance, has a Buy rating and $20 price target on Ford stock.
BofA analyst John Murphy recently went on the road with Ford's CEO and chief financial officer. "The conversation focused on Ford's efforts to reduce warranty costs, opportunities to grow earnings in Ford Pro, and the company's progress in cutting EV costs," Murphy said, with the executives reiterating that the company plans to make "no changes to its capital allocation strategy" and "pay out 40% to 50% of free cash flow as dividends and deploy capital to grow the business."
Related Content
-
Average Net Worth by Age: How Do You Measure Up?Financial advisors discuss the secrets to growing your net worth over time.
-
Three Charitable Giving Strategies for High-Net-Worth IndividualsIf you have $1 million or more saved for retirement, these charitable giving strategies can help you give efficiently and save on taxes.
-
Three Charitable Giving Strategies for High-Net-Worth Individuals
If you have $1 million or more saved for retirement, these charitable giving strategies can help you give efficiently and save on taxes.
-
The Wealth-Building Powers of Health Savings Accounts (HSAs)Health savings accounts could be the most underutilized wealth-building tool out there. Here’s who should use them and how to maximize their benefits.
-
Seven Ways to Be an Absolute Jerk as a LawyerHere's what law students need to know about damaging their relationships with other lawyers and judges and running up the bill for clients.
-
Stock Market Today: Stocks Are Positively Mixed to Open DecemberTechnology led the way Monday as two of the three main equity indexes closed higher.
-
The Best Retail Stocks to Buy This Holiday SeasonE-commerce is a growing trend, but most folks still prefer to shop in stores. That makes these dominant retail stocks worth a closer look.
-
One Good Way to Withdraw Retirement Assets (and a Bad One)Don't withdraw retirement assets haphazardly. Managing distributions intentionally can lower your taxes, conserve your wealth and reduce Medicare premiums.
-
What Is Capital Gains Tax Deferral?Spoiler alert: It's the secret weapon of savvy real estate investors. Here's how it works and details about the tools you need to do it.
-
Don't Leave Your Heirs an IRA Tax BombYour traditional IRA has served you well, but when your heirs inherit it, watch out. Consider some of these strategies to minimize their tax burdens.
