Ford Stock Predictions: One of the Only Carmaker Outperforming The Transports Sector in a Time Of Crisis

Ford Stock Predictions: Summary

  • Promising 3Q results in line with expectations, EPS coming in at $0.45, largely due to a strong rise of +9.4% in US salesf
  • Latest “one ford” strategy in the process of being implemented very successfully, aiding with the sale of small cars in the US
  • Based on our fundamental analysis and strategic algorithm forecasts we maintain a bullish view on Ford

Equity Profile

Equity Rating Overweight
Price $14.52
Date of Price 06 Nov 15
Market Cap (mn) 58,065.48
Price Target $23
Price Target end Date Nov 8

Above is our preview for the share

I know first has had a bullish view on Ford since July 2015. Recently 3Q15 results for Ford were released on a very promising note for the share price to increase due to an increase in sales, especially in the US and other factors that we will look at deeper in the analysis.

Our prediction on Ford was strongly based on our Algorithm. Our daily forecasts based on machine learning provide us with very accurate predictions on the movements stocks will have within the market and different sectors.

Ford’s equity price hasn’t moved much since the news, and it’s remained pretty stagnant around it’s price of $14.50. We think this is due to various reasons such as low trust in the car market on the buy side. It also has to be note that the recent scandal with Volkswagen has affected the Transportation sector in a negative way.

American Market Success

Ford’s North America production tracked very strong in 3Q15, even though not as strong as we had originally expected. We estimate a production increase of 14% equal to 792K units in 3Q’s Ford North America production. We estimate production to be around 3200K units (+5%) in 2015 based upon IHS’s latest forecasts.

Considering that ford only managed to score 11.2% in 2Q, which was not boosted by their newest F-150, a 3Q seemed very prone to be incredibly strong. 3Q in fact fully benefitted from the strong pricing and volume given by the new F-150 pickup. We have estimated an 8.5%-9.5% target range for 4Q.

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Source: Ford.com

International Markets

Ford’s European production was in line with our previous estimates, and came in quite strong. Ford’s light vehicle European production rose +17% equal to 375K units in 3Q15. We estimate European production of 1,500K units in 2K15, based on HIS reports.

Ford’s South American production was not as bad as it could have been; we’ve estimated that production only declined of about -1% to 96K in 3Q15. Our forecasts for production in 2K15 based on HIS reports are not very encouraging; we are looking at a loss of about 6%.

Our 3Q15 forecast for the Middle East, Africa and Asia are very promising in the near future, but weren’t great 3Q. Ford still managed to increase production in those countries combined despite the rapid decline of Chinese production. We expect a full recovery in China due to an implementation of government aid, therefore based on HIS reports we forecast an increase in production of +6% in 2K15.

Investment Thesis and Financials

Many changes have occurred at Ford under the innovative “one ford” strategy. The strategy, aims to sell off non-core businesses and brand, so to have its management, designers and engineers around the world fully concentrated on Ford’s core business. As a result we are convinced that Ford’s teams are now more focused, and work more effectively together, accelerating new business developments and ideas as a result. It’s important to know that the “one ford” strategy has also helped solve one of the oldest problems carmakers tend to have in the United States, selling small cars at a profit.

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Source: Bloomberg, Company Data, JP Morgan Analysis

We maintain out Overweight rating and our July 2K16 price target of $23. Our price target is based on our “I know first” financial algorithm, as well as an EV/EBITDA based valuation that applies a 4.5x multiple to our 2K17E EBITDA estimate of $13.1bn.

The main risks to the rating and price target are:

  • A further decline in interest rates which is likely to lead to a greater underfunded status of pension funds
  • A sudden increase in oil prices which could hurts the market for SUV and pick up trucks
  • Worse than expected production volumes

Ford Motors Financials

Ford Stock Predictions

Source: Company Data

Algorithmic Analysis

I Know First supplies financial services, mainly through stock forecasts via their predictive algorithm. The algorithm incorporates a 15-year database, and utilizes it to predict the flow of money across 2000 markets. Having said that, intraday traders, along with short-term players, will also benefit by taking the algorithmic perspective into consideration.

The self-learning algorithm uses artificial intelligence, predictive models based on artificial neural networks, and genetic algorithms to predict money movements within various markets.

The algorithm produces a forecast with a signal and a predictability indicator. The signal is the number in the middle of the box. The predictability is the number at the bottom of the box. At the top, a specific asset is identified. This format is consistent across all predictions. The middle number is indicative of strength and direction, not a price target. The bottom number, the predictability, signifies a confidence level.

 

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Figure 1. 1-Month, 3- Month And 1-Year Algorithmic Forecasts For F

The figure above includes the one-month and one-year forecasts for GE from May 3rd, 2015. In the one-month forecast, the company has a  weak signal, indicating the algorithm believes the stock is properly valued for that time horizon. The three-month and one-year forecast have stronger signal, indicating that the stock price will increase over the long term, in accordance with our previous analysis.

Conclusion

After analyzing various aspects of Ford’s business and financials in depth, with an interest in their presence in Europe, the US and Asia we remain confident that Ford is a long core overweight stock. On top of our general fundamental analysis, our algorithm constantly amazes us with incredible accuracy. It has given a strong bullish signal on Ford as well and we are confident it is going to be a good one.

 

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