<Results Analysis> 4Q23 results a beat despite UAW impact; FY24F outlook brighter than expected
- 4Q23 adjusted EPS beat consensus with healthy volume despite UAW impacts; FY23 beat
- FY24F guidance was positive, ahead of consensus estimates of a declining year, with Pro segment positioned as crown jewel
- EV headwinds persists, with EV segment guided to see steepening losses in 2024. Maintain HOLD with higher TP of US$13 (previous US$11) on stronger-than-expected FY24F guidance although EV headwinds may remain as an overhang.
FY23/4Q23 results beat consensus. 4Q23 non-GAAP EPS of US$0.29 beat consensus estimates of US$0.12 by +134%, on the back of stronger-than-expected deliveries/revenue/EBIT which exceeded estimates by +6% despite UAW impact as well as positive contribution after adjusting back for special items (e.g., higher pension costs and readjustments), while adjusted EBIT margins remain in-line with expectations at 2.3% (down -2.7% qoq, -3.5% yoy). On a full year basis, FY23 non-GAAP EPS came in at US$2.01 (+7% yoy) which exceeded estimates of US$1.87 by +7%; Whilst revenue (+11% yoy) and adjusted EBIT margins (at 5.9%, down -0.7% yoy) was in-line with expectations, positive contribution after adjusting for special items has contributed to the FY23 EPS beat. Across its segments, Pro saw robust improvements in FY23 EBIT margins to 12.4% (up from FY22 of 6.6%) with Blue EBIT margins remaining stable yoy at c.7%, whilst Model E segment saw worsening EBIT margins at -80% (down from FY22 of -41%) on stiff EV competition witnessed in 2023.
FY24F guidance stronger-than-expected with bullish outlook for Pro segment, to offset steeper EV losses; Maintain HOLD. Ford’s FY24F group adjusted EBIT guidance of US$10-12bn exceeded consensus’ expectations of US$10bn, with automotive EBIT guided at US$9.5-11.5bn, a -5% to +15% growth from FY23A’s levels, boosted by Pro segment (+11% to +25% EBIT growth) while Blue segment is expected to see slight negative impact (-6% to +1%), supported by a US$2bn cost reduction plan. Most notably, Ford is turning more negative for its Model E segment (EVs), with steeper-than-expected EBIT loss guidance at -US$5bn to -US$5.5bn, an increase of almost 15% from FY23A’s losses of -US$4.7bn, as a result of continued pricing pressure and investments. Further, Ford has also guided for a slowdown in battery investments i.e., delay in second JV battery plant in Kentucky (with SK On), reduction in capacity for its LFP plant in Michigan and cancellation of its battery plant in Turkey, signalling a weakening EV outlook. Whilst some positive catalysts for Ford remains, including its upcoming product launch roadmap (e.g., new F-150 in 2024, new Transit Custom under Ford Pro), the slowdown of its EV plans could dampen the stock sentiment in the near-term. Maintain HOLD with higher TP of US$13 (versus previously US$11) on the back of a stronger-than-expected FY24F outlook although continued EV headwinds remain. Our TP is based on forward PE ratio of 7.5x (previous 7x), near historical PE averages, on a Y+1 basis.