Ford’s Capital Markets Day is designed to persuade Wall Avenue of plans for electrical automobiles
DETROIT – Ford engine on Monday will seek to turn skeptics into believers in its electric vehicle growth plans, which some Wall Street analysts have called “ambitious” and “crazy high.”
The Detroit-based automaker will host its Capital Markets Day, where it has promised to provide details on how Ford expects to meet previously announced goals of an 8% EBIT margin for its electric vehicle division and a production rate of 2 million electric vehicles by 2026 probably 600,000 by the end of the year.
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“We’re going to explain to you why we think an 8% margin is totally realistic despite the pricing pressure that we’re definitely going to see because everyone wants to grow,” CEO Jim Farley said during the earnings call of the first quarter earlier this month.
The event is dubbed “Delivering Ford+,” a nod to Farley’s bailout and restructuring efforts, which some have criticized for not being implemented quickly enough. Farley announced the plan seven months into his tenure in May 2021.
The automaker’s CEO described the capital markets day as an opportunity to show how the strategy is “bringing to life”. The company is expected to return its traditional Ford Blue and Ford Pro commercial vehicle businesses, as well as its Model e electric vehicle division, to profitability.
Ford is also expected to preview its second-generation battery products and technology, which the company says will be critical to achieving that 8% EBIT margin. The electric vehicle business is expected to lose about $3 billion this year.
Ford previously said that it expects to achieve that profit margin primarily through economies of scale, improvements in electric vehicle batteries, and improvements in design and engineering efficiencies.
“There are definitely some analysts who are skeptical,” Morningstar analyst David Whiston told CNBC. “I think Monday is an opportunity to convince some of these skeptics that it can happen. Personally, I’m willing to give them the upper hand when in doubt…you have to win people over.”
Whiston described the timeline for the goals as “tight.” Others were more critical.
Adam Jonas, an analyst at Morgan Stanley, called the increase in electric vehicle production “insanely high” during Ford’s first-quarter earnings call. Barclays analyst Dan Levy called it “ambitious” in a note to investors this week.
“Right now, we are skeptical about Ford’s ability to meet both targets as we anticipate the company choosing a balance between volume and profit opportunity,” Levy said.
Analysts don’t expect the stock to move much from the event unless Ford surprises with a new product or a change in previously announced plans.
“Overall, we anticipate that Ford’s key objectives are unlikely to differ from recent training, but management will seek to provide investors with more reassurance,” Deutsche Bank analyst Emmanuel Rosner said on Wednesday in issued an investor announcement and reaffirmed the sale of the company’s valuation of the stock.
According to analyst ratings and estimates compiled by FactSet, Ford stock is rated Hold with an average price target of $13.63 per share.
Ford’s shares are up about 75% since Farley became CEO in October 2020. The stock closed at $11.65 a share on Friday.
– CNBC’s Michael Bloom contributed to this report.
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