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Wall Street Has High Expectations for Ford's Investor Day

Michael Wayland / CNBC
  • Ford will host its first capital markets day for investors under CEO Jim Farley, who has been well-received by Wall Street.
  • Expectations range from a clear path for the company to achieve an 8% adjusted profit margin to new details regarding its plans for electric and autonomous vehicles.
  • Ford's stock price has doubled since Farley took control of the company Oct. 1, including a 12.6% increase last week.
Ford CEO Jim Farley speaks with reporters outside the company's world headquarters on May 19 in Dearborn, Michigan, following the debut of the electric F-150 Lightning pickup truck
Michael Wayland / CNBC
Ford CEO Jim Farley speaks with reporters outside the company's world headquarters on May 19 in Dearborn, Michigan, following the debut of the electric F-150 Lightning pickup truck

DETROIT — Wall Street has high expectations for Ford Motor's first investor day under CEO Jim Farley on Wednesday.

The company's stock price has roughly doubled since Farley took control of the company Oct. 1. That includes a 12.6% increase last week after the debut of the company's new electric F-150 Lightning pickup truck.

Investors will be watching the highly anticipated investor event to see if Farley can keep up the momentum. He has promised to provide details his management team's direction for the automaker.

"[It's] a big deal. It's my management team's coming-out party," Farley said last week. "Yes, we've had a couple good quarters. That's great, but really the big test is what's our plan for the company and how it's going to add value."

Farley's predecessor, Jim Hackett, was criticized by Wall Street for failing to detail his turnaround plan and having an unclear vision to fix Ford's operations. Farley's plan will have to be detailed to appease Wall Street.

"Since Jim Farley has taken over as CEO, Ford has promised increased transparency and measurable [key performance indicators] so we can track Ford's progress and execution," RBC Capital Markets analyst Joseph Spak said in a note. "We expect those, along with financial targets, to be detailed at the event."

Other expectations range from a clear path for the company to achieve an 8% adjusted profit margin to new details regarding its plans for electric and autonomous vehicles. Here are additional details on those items and more.

Financial targets

An ongoing promise of Farley has been providing clear financial targets that Wall Street can measure the company's progress against.

One of the main targets analysts want to see is a long promised 8% global adjusted profit margin target, including 10% in North America and 6% in Europe. The 8% was promised by Hackett as well as his predecessor, Mark Fields, as part of a "2020 vision" that never happened.

"We'll look for an update and a bridge to Ford's prior 8% margin target," Citi analyst Itay Michaeli said in a note Friday. "The more details the better. Though consensus out-year estimates appear in-line with Ford's ~8% target, the Investor Day serves an opportunity to build greater confidence."

Before the coronavirus pandemic, Ford's adjusted profit margin was 4.1% in 2019, followed by 2.2% in 2020. Due to an imbalance of supply and demand in new vehicles due to an ongoing global semiconductor chip shortage, it was inflated to 13.3% during the first quarter of this year.

For comparison, General Motors' adjusted profit margin was 6.1% in 2019, 7.9% in 2020 and 13.6% during the first quarter of this year.

Wells Fargo analyst Colin Langan expects Ford to reaffirm its long-term margins at the event, and mostly focus on the "future mobility themes" such as electric and autonomous vehicles and data monetization.

Bronco EV?

Following the successful debuts of the Ford Mustang Mach-E crossover and F-150 Lightning, investors want to know what's next for Ford's electric vehicles.

Ford is viewed as trailing Tesla as well as GM when it comes to battery supply, it's future EV lineup and overall plans.

"Key to Ford's future stock performance will be convincing investors the automaker can emerge a relevant player in EVs," said Deutsche Bank analyst Emmanuel Rosner in a note.

Farley has said the company plans to electrify its most iconic nameplates, leading some such as RBC's Spak to question whether the company will offer an electric version of its upcoming Bronco SUV.

Ford is launching the 2021 Bronco with more than 200 factory-backed aftermarket accessories for more capability and personalization.
Source: Ford
Ford is launching the 2021 Bronco with more than 200 factory-backed aftermarket accessories for more capability and personalization.

"Our strategy is very simple. We are not going to electrify every vehicle in every segment. We are going to focus on where we are outstanding," Farley said earlier this month during the automaker's annual shareholder meeting. "We're going to electrify our most iconic vehicles."

In February, Ford announced plans to increase its investment in electric vehicles to $22 billion through 2025. That included $10.5 billion in new investments and $7 billion it previously spent since 2016.

Analysts also want to know an expected sales target from Ford for EVs. GM has said it plans to sell 1 million EVs annually by 2025 under a $27 billion plan in electric and autonomous vehicles through 2025. That includes launching 30 new EVs globally by then.

Ford last week answered analysts' questions on whether the automaker would make its own battery cells by announcing plans for a joint venture with South Korean battery maker SK Innovation.

AVs

As part of its increased investment in EVs, Ford announced it would spend $7 billion in self-driving vehicles through 2025, up from $4 billion from 2018 through 2023. That includes investments in Argo AI, a jointly owned autonomous vehicle unit with Volkswagen.

A detailed update ahead of an expected commercial launch of Argo's business next year would be viewed as positive for Wall Street.

Lidar offers ultra-high resolution perception, providing the photorealistic imaging required to identify small objects for safe operation on complex city streets.
VW
Lidar offers ultra-high resolution perception, providing the photorealistic imaging required to identify small objects for safe operation on complex city streets.

"Our impression is that Argo is making significant progress. A detailed update — including with respect to the go-to-market strategies — could further underscore Ford's position to capture future installed-base economics," Citi's Michaeli said.

Argo is testing its self-driving technology in six U.S. cities using Ford vehicles. The company earlier this month unveiled its own lidar, which many believe is the key technology to commercializing autonomous vehicles.

Data

Many of Farley's promises have revolved around connectivity and data monetization, including its industry-leading fleet and commercial business.

During the company's first-quarter earnings call last month, Farley said the company was "only scratching the surface of our customers benefiting from our fully connected vehicles."

2022 Ford F-150 Lightning
Ford
2022 Ford F-150 Lightning

Most recently, Ford said it expects to produce 33 million connected vehicles capable of significant remote, or over-the-air, updates by 2028. On Monday, it also detailed its plans to monetize fleet data for customers with the F-150 Lightning.

Wells Fargo's Langan said while Ford has made several announcements in the weeks leading up to the capital markets day, it remains "optimistic the event will still positively surprise, possibly on the Big Data front which has received less investor focus."

— CNBC's Michael Bloom contributed to this report.

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