Changes needed at Ford to avoid loss of market share, free cash flow erosion – analyst
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Ford (NYSE:F) faces a variety of headwinds into 2025 that should encourage the company to make significant cost restructuring at Ford Blue, increase discounts on its F-150 series, and improve its EV platform that unless taken will have a substantial impact on its market share and free cash flow.
Seeing the warning signs ahead, Bernstein’s Daniel Roeska downgraded Ford (F) to Market-Perform from Outperform and cut his FY25 adjusted EPS forecast by 5% and sets a $4.1B free cash flow target for 2025 that is currently 20% below the Street’s consensus estimate. Roeska expects Ford’s (F) EBIT to drop 17% year-over-year in the first half of 2025, driven by a slowdown across all segments and a lack of improvement in Model e.
“With sluggish consumer sentiment and more aggressive pricing from competitors, Ford will need to defend its F-150 cash cow in the U.S. market and start increasing its discounts to maintain market-share,” Roeska said in his research note.
Is Ford’s (F) lackluster performance due to market or idiosyncratic changes? Roeska thinks it’s both. Ford has clearly been impacted by rising cost, sluggish demand, and increasing pricing pressures like other OEMs, he says, but a course correction is necessary on warranty provisions, its EV strategy, and even its outlook on the Pro business.
“Every management team will always try to mitigate headwinds, but in the case of Ford these efforts have not been sufficient to steady the ship. Instead, the ever shorter-term focus of executives creates the impression that the team feels it currently may not have sufficient control of the business,” says Roeska, warning that upcoming quarters will likely see significant pricing headwinds in the U.S. market that neither Ford nor competitors will be able to escape.
In knee-jerk reaction to lowered guidance and continued losses in its EV division, Ford (F) shares tumbled as much as 10% but have since reversed most of those losses since last week.