Deutsche On Ford Motor: Long-Term Strategies Intriguing, But Headwinds Are Mounting

While the longer-term strategies and opportunities highlighted during Ford Motor Company’s F Investor Day were intriguing, guidance indicated mounting profitability headwinds in the intermediate term, Deutsche Bank’s Rod Lache said in a report. He maintained a Hold rating on Ford, with a price target of $13.

Ford is spending faster than expected on new technologies and opportunities. Analyst Lache added that “content on new vehicles (new Super Duty) is rising more rapidly than we anticipated, and Ford’s updated views on Europe were more cautious than previously suggested.”

Earnings Decline In 2017

Ford indicated that earnings could decline in 2017. Lache pointed out that this was is in-line with DB estimates. The company also suggested an increase in capex, resulting in further pressure on FCF.

The analyst projected FCF of ~$3.6 billion for 2017, down significantly from $5.3 billion in 2016 and $7.3 billion in 2015. He added that these pressures had emerged for Ford, while the industry was benefiting from “relatively supportive conditions.”
Lache expressed concern regarding Ford’s outlook, highlighting significant potential for “additional headwinds related to regulatory compliance, light truck capacity, and used vehicle prices by 2018.”

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