Argus Research has maintained a BUY rating on Ford Motor Company (NYSE: F) following its strong fourth-quarter earnings report, which showed a 35% increase in adjusted net income. Despite facing industry challenges such as electric vehicle pricing pressures and currency exchange headwinds, Ford's diverse product portfolio and operational improvements underscore its long-term growth potential. With a target price of $13 per share, the company continues to demonstrate leadership across internal combustion, hybrid, and electric vehicle markets.

Overview of Ford's Latest Earnings Performance

In 4Q24, Ford reported:

Adjusted net income of $1.563 billion or $0.39 per diluted share, up from $1.162 billion a year earlier.
Revenue of $48.2 billion, a 5% year-on-year increase.
Earnings per share (EPS) exceeded consensus estimates of $0.34, signaling continued strong demand and pricing power.
The earnings growth was driven by improved product mix, higher sales volume, and positive pricing strategies, offsetting cost pressures from warranty expenses and unfavorable foreign exchange rates.

Segment-Wise Analysis

Ford has reorganized its business into three key divisions: Ford Blue (gasoline and hybrid vehicles), Ford Model E (electric vehicles), and Ford Pro (commercial solutions).

Ford Blue

The Ford Blue division reported a revenue increase of 4% to $27.3 billion, driven by:

Improved net pricing strategies.
Cost efficiencies in freight and manufacturing.
An EBIT of $1.6 billion, with a margin of 5.8%, up from 3.1% in the prior year.

Ford Model E

The electric vehicle segment experienced a decline in revenue, dropping to $1.4 billion due to:

Reduced volume by 9%.
Industry-wide EV pricing challenges.
However, the EBIT loss of $1.4 billion was narrower than last year’s $1.6 billion loss, suggesting some improvement in managing EV-related costs.

Ford Pro

Ford Pro recorded a 5% revenue increase to $16.2 billion, attributed to:

Higher retail demand and product mix optimization.
A slight decline in EBIT margin to 10.0%, mainly due to rising warranty expenses and project-related spending.

Financial Projections and Guidance for 2025

Ford projects:

Adjusted EBIT between $7.0 billion and $8.5 billion.
Free cash flow of $3.5 billion to $4.5 billion.
Capital expenditures in the range of $8.0 billion to $9.0 billion.
Despite these strong figures, Ford's guidance prompted Argus to revise its 2025 EPS estimate to $1.66, down from $1.79, reflecting anticipated losses in the Model E segment and slightly lower revenue contributions from Ford Pro.

Valuation and Target Price

Ford shares are currently trading at $9.24.
The 12-month target price is set at $13, implying a 7.4x forward P/E ratio based on 2026 EPS estimates.
Key valuation metrics such as price-to-book and price-to-earnings ratios indicate that the stock remains attractively valued compared to historical averages and industry peers.

Balance Sheet and Liquidity Position

As of 4Q24, Ford’s financial strength includes:

Cash and cash equivalents of $22.935 billion, down slightly from $24.862 billion in the previous year.
Total liquidity of approximately $47 billion.
A total debt-to-capitalization ratio of 77.5%, reflecting a slight increase from the prior year's 76.9%.
The company has also structured credit facilities with environmental, social, and governance (ESG) metrics, which could impact borrowing costs based on performance in sustainability initiatives.

Dividend and Shareholder Returns

Ford has reinstated its quarterly dividend, currently set at $0.15 per share, resulting in an annualized yield of approximately 5.99%. Additionally, the company declared a supplemental dividend, highlighting management’s confidence in long-term profitability.

Management Changes and Strategic Direction

CEO Jim Farley has led Ford since October 2020 and continues to focus on innovation and operational improvements.
Sherry House was appointed CFO, bringing expertise from her previous role at Lucid Motors.
These leadership moves aim to enhance Ford's competitiveness in both traditional and emerging automotive markets.

Key Risks and Industry Challenges

Ford faces several risks, including:

Economic uncertainty and fluctuating consumer preferences.
Rising costs for components and raw materials.
Intense competition, particularly in the electric vehicle space, where Tesla and General Motors are key rivals.

Technical Analysis: Levels to Watch

Ford’s stock has been trading within a range of $9.18 to $14.85 over the past 52 weeks. From a technical perspective:

Support level: $9.20.
Resistance level: $10.50.
The stock is currently near oversold territory, suggesting potential for a rebound if macroeconomic conditions improve.

Conclusion and Investor Recommendations

Argus Research’s BUY rating reflects confidence in Ford's ability to overcome near-term challenges and capitalize on growth opportunities in both its traditional and electric vehicle segments. The company's strong financial position, diversified product offerings, and ongoing investments in technology position it well for long-term success.