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Ford stock is down about 25% year-to-date.
Jeff Kowalsky/AFP via Getty Images
Ford engine
Chief Financial Officer John Lawler speaks at the Bank of America conference held at the New York Auto Show. The way he talks about the business is new.
At the beginning of March, Ford (ticker: F) announced its intention to radically reorganize its activities. There would be Ford Blue, the historic company that sells gas-powered vehicles. Ford Model e would handle the electric vehicle business. And Ford Pro would sell vehicles and services to commercial customers.
“Every customer is different. You look at customer e, you look at customer Blue and Pro,” Lawler told Bank of America analyst John Murphy. “So to serve those customers, we thought that was the best way to do it with each of the divisions.”
There is, of course, some overlap between the divisions. Ford Pro customers will be buying both gas and electric vehicles for years to come. And the electronics that go into a gasoline-powered car will come from Ford Model e. Still, Ford organized itself this way to be more nimble, according to Lawler. “It’s a big change for the company, but that sense of purpose and focus really carries the team through.”
Lawler also believes the reorganization will help Ford attract top talent. “Talent attracts talent,” said the CFO. “Doug is an amazing engineer.”
The Doug he’s talking about is Doug Field, who was ripped from
Apple
(AAPL) to run the model e. Field has extensive automotive experience with a stint at Ford as well as time at
You’re here
(TSLA). In March, at the time of business realignment, Field was named director of electrical and digital systems at Model e.
There’s a lot going on in a Ford these days. And the realignment will also change Lawler’s role. From 2023, Ford will no longer report by geographic region and will report by Blue, Model e and Pro. This will give investors a way to measure the profitability of the growing electric vehicle business.
Ford plans to sell 2 million electric vehicles a year by 2026.
If the reorganization works, it could be good news for Ford shareholders. Electric vehicle companies are valued differently than traditional car companies. Tesla shares are trading at 70 times estimated 2023 earnings, while Ford shares are trading at 7 times.
Tesla, of course, is growing rapidly, and investors fear that every EV sale Ford makes will result in one less gas-powered vehicle being sold. If Ford can show investors that the Model e and Blue can thrive in the future, a better price-earnings ratio could be on the way.
It is an optimistic view of the future. For now, Wall Street is conservative. Only 50% of analysts covering Ford stock rate it buy. The average buy rating ratio for S&P 500 stocks is around 58%.
Analysts’ average price target, however, is nearly $21 per share, up 33% from recent levels. At $21 a share, Ford stock would trade at around 9.5 times estimated 2023 earnings.
Ford stock closed 1% higher at $15.51 on Wednesday. the
S&P500
and
Dow Jones Industrial Average
increased by 1.1% and 1% respectively.
Ford stock is down about 25% year-to-date, part of the 136% gain investors have seen in 2021.
Write to Al Root at [email protected]