On Thursday, Citi adjusted its outlook on Ford Motor Company (NYSE:F), reducing the price target to $17 from the previous $18, while still endorsing the stock with a Buy rating. The adjustment follows the automaker's second-quarter performance, which fell short of expectations due to cost containment issues and unmet anticipation for more assertive capital deployment.
Ford's second-quarter results were affected by additional warranty costs, which led to a miss in cost containment goals. Despite these challenges, the company confirmed its 2024 EBIT guide, citing the strength of its Pro division that managed to absorb the roughly $1 billion warranty and related setbacks at its Blue division.
Additionally, Ford's forecast for second-half EBIT is above the Factset consensus, and the company has raised its free cash flow (FCF) guidance while also reporting progress in its software development.
The analyst from Citi acknowledged that while the results only met expectations, including at the Pro division where a beat was anticipated following recent news about the SuperDuty, there was still positive news to consider. The confirmation of the 2024 EBIT guide and the improved second-half outlook were among the favorable developments highlighted.
In the report, the analyst expressed the belief that Ford is capable of resolving its warranty-related issues, framing it as a matter of timing rather than possibility. Despite anticipating some pressure on Ford's stock, the analyst did not see the quarter's results as altering the fundamental investment thesis.
InvestingPro Insights
As Ford Motor Company (NYSE:F) navigates through its recent challenges, the data and analysis from InvestingPro can provide investors with additional insights. Ford's current market capitalization stands at $54.58 billion, and the company is trading at a price-to-earnings (P/E) ratio of 13.93, which is notably attractive considering its adjusted P/E ratio for the last twelve months as of Q1 2024 is even lower at 9.56. This underscores the company's potential for near-term earnings growth, as reflected in the PEG ratio of 0.4 for the same period, indicating that the stock might be undervalued relative to its earnings growth prospects.
Investors may also take interest in Ford's dividend profile. The company boasts a significant dividend yield of 5.71% as of the latest data, with a substantial increase in dividend growth of 30.0% over the last twelve months as of Q1 2024. This commitment to returning value to shareholders is further evidenced by Ford maintaining dividend payments for 13 consecutive years, a testament to its financial resilience.
Two InvestingPro Tips that are particularly relevant to Ford's situation are the analysts' revisions of earnings upwards for the upcoming period and the prediction that the company will be profitable this year. These insights suggest a positive outlook for Ford's future financial performance. For those interested in a deeper analysis, there are additional tips available on InvestingPro, which can be accessed by using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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