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theSwift FCF Yield

The Ford Mustang Is Forever

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Ford Mustang one of the last sedans

A federal court recently reinstated the federal fuel efficiency requirements which would affect Ford Motor Company (NYSE: F). Soon after this development the company stated to reduce North American sedan production. The Ford Mustang, however, will remain and likely forever. Ford's free cash flow (FCF) yield is set to grow as the Mustang becomes the primary North American production model. Ford trucks and SUVs have not been adjusted. In summary, Ford's presence will be the F-150, Explorer, and the Mustang.

"By 2020, almost 90% of our Ford portfolio in North America will be trucks, utilities, and commercial vehicles, including, of course, their electrified versions... Over the next few years, our Ford car portfolio in North America will transition to two vehicles, our best-selling Mustang and an exciting all-new Focus Active crossover coming out next year." - James Hackett, Ford CEO

Ford stock price per share responded positively to the latest, Q1 2018 earnings. The company had increased its revenue since last Q1 of 2017 by 7.2%. This was considered better than what analysts expected, by an estimated $4.8b beat. The earnings per share (EPS) was also better than market predictions with a $0.43 EPS.

Ford Partnerships

It was Fall of 2017 when we last heard of Ford's partnership with Lyft. The partnership was to focus on autonomous/self-driving vehicle technology.

For a Lyft ride share coupon, click: Lyft ride.

According to the Q1 2018 Ford earnings transcript, Ford will operate autonomous vehicles in Florida by end of 2021. This will be a partnership with Domino's Pizza and Postmates.

Ford's other ride share venture, Chariot expanded to London in the Winter of 2018. This development shows the Ford van or Transit Bus is still in production and with global demand.

The Swift Free Cash Flow (FCF) Yield

Excluding the Ford credit segment, the cash and other liquidity is $38.6 billion according to the latest Ford presentation (see slide 34). This supports active measures such as Research and Development (R&D), paying share holder dividends, and investment capital.

In past comparisons of FCF Yield, Ford has shown the better yield versus competitor General Motors. At 2H 2017, The Swift FCF Yield showed Ford to have nearly 4.5% FCF Yield (of Enterprise Value), while GM had a negative yield. According to the latest Q1 2018 earnings, GM again had negative FCF of $3.5 billion, but expected to be positive by years end: "We are on track with our 2018 free cash flow expectation of approximately $5 billion, which we will generate through strong EBIT performance for the balance of the year, working capital rewind, our annual China dividend payment and reduced capital spending on a run rate basis."

At the Ford Motor Company earnings call, the company stated to have approximately $3.5b in Operating Cash Flow (OCF) at the Q1 mark. They had about $1.8b in CapEx for an estimated free cash flow (FCF) of $1.7b. The FCF Yield for Ford was approximately 3.72% (Market Capital). The yield in relation to Enterprise Value was 1.02%.

Ford FCF Yield Chart

Free Cash Flow is obtained by taking the value of the company's operating cash flow and subtracting from it the value of capital expenses. The yield is then formulated by dividing the result by either the market capital or enterprise value.


Disclosure: I/we have no positions in GM and no plans to initiate any positions within the next 72 hours. I/we are long F.

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