Ford stock rises after it supports earnings guidance. Investors meeting today.

Ford +

Addition strategy includes a lot of things. Essentially, it’s about preparing the company for the future – and making sure it’s going to be around for the next 120 years.

CEO Jim Farley really kicked off the next phase of Ford’s future in early 2022 when he reorganized the company into new business units: one dedicated to traditional cars, called Ford Blue, one for business, called Ford Pro and one dedicated to electric vehicles, called Model E.

One consequence of the reorganization is how investors see each division’s financial results. But change is not just about numbers. “We have a much smaller Model e team,” says Lisa Drake, Ford’s vice president of manufacturing for the Model e division.

Drake adds that the smaller size enables the e team to go faster and break the rules in the car industry “that aren’t really rules”. “I call it urban legends inside Ford, things we’ve convinced ourselves of [of]. This could include the way cars are designed or how fast it takes to bring a new model to market.

Ford+ is also about vehicle digitization, adding software on both electric and conventional vehicles. The best example of this might be Ford’s Blue Cruise free driver assistance software, but the software controls a lot in modern cars including the suspension and brakes, among other things.

The car “is the next big device to be digitized,” Farley says, adding that putting software into vehicles is as big a game changer and profit opportunity for the industry as electric cars.

he won

Only now a lot of money is an important question for investors. Ford’s traditional and professional businesses delivered a 10% increase in operating profit margins in the United States First Quarter, generating $4 billion in operating profit. Ford Model e lost $700 million in the first quarter.

For the full year, Ford announced Monday that it still expects operating profit of between $9 billion and $11 billion, including a loss of $3 billion in the Model e division. Wall Street expects about $10.3 billion in operating profit for the year.

Ford stock rose 0.8% in premarket trading Monday after repeating full-year financial guidance.

Standard & Poor’s 500

And

Dow Jones Industrial Average

Futures were flat.

Ford clearly needs to improve the e-model’s operating profitability and has plans to do so. The company is targeting Model e operating profit margins of 8% in 2026. Some of that comes from volume — making more cars from the same number of factories. If all goes as planned, Ford could sell about a million electric vehicles in 2026. Some of that comes from design, too.

Farley says the next generation of Ford’s electric vehicles are “largely simpler.” A second session will help [profitability] a lot.”

Generation 2

Ford has begun calling its second round of electric vehicles, those after the Mach-E, E-Transit van and F-150 lightning, the second generation of vehicles.

“The simplicity of the design helps from a cost-effective perspective,” says Drake, reflecting on what’s to come with the second-generation products. “The cockpit is more digital.” From a manufacturing perspective, second-generation vehicles will use less labor and be assembled more efficiently, she says.

Inventory

Any updates about the new electric car’s design or cost could move Ford stock in the coming days. The success of the Ford + strategy will determine how the stock performs in the coming years.

Farley is optimistic about the future. “It’s like investing in Apple

Or Samsung in 2006, before that transition to smartphones,” he says. Their job “is to be one of the first winners.”

Heading into Monday trading, Ford stock has been flat so far this year and is down nearly 7% over the past 12 months, leaving shares trading at less than 7 times estimated 2024 earnings. The S&P 500 is up about 10% this year and about 5% over the past 12 months. The S&P trades at just over 17 times estimated 2024 earnings.

Rising interest rates have hurt car affordability and sapped some investor enthusiasm for the sector. Other auto stocks also suffered. Shares of General Motors (GM) and Tesla (TSLA) are down about 9% and 20% over the past 12 months, respectively.