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Ford Is Now 3 Businesses. What That Means for the Stock.

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Ford stock is down about 25% year to date.

Jeff Kowalsky/AFP via Getty Images


Ford Motor

Chief Financial Officer John Lawler spoke at the Bank of America conference taking place at the New York Auto show. The way he’s talking about the business is new.

Back in early March, Ford (ticker: F) announced plans to dramatically reorganize its business. There would be Ford Blue, the legacy business that sells gasoline-powered vehicles. Ford Model e would handle the electric-vehicle business. And Ford Pro would sell vehicles and services to commercial customers.

“Each customer is different. You look at the customer e, you look at the customer Blue and Pro,” Lawler explained to Bank of America analyst John Murphy. “So to serve those customers, we felt this was the best way to do it with each of the divisions.”

There is, of course, some overlap between the divisions. Ford Pro customers will buy both gasoline and electric vehicles for years to come. And the electronics that go into a gasoline powered car will come from Ford Model e. Still, Ford organized itself this way to be more nimble, according to Lawler. “It’s a big change for the company, but that sense of purpose and focus is really carrying the team through.”

Lawler also thinks the reorganization will help Ford attract top talent. “Talent attracts A talent,” said the CFO. “Doug is an incredible engineer.”

The Doug he is talking about is Doug Field, who was plucked from


Apple

(AAPL) to run Model e. Field has a deep automotive background with a previous stint at Ford as well as time at


Tesla

(TSLA). In March, at the time of the business realignment, Field was named chief EV and digital systems officer at Model e.

The is a lot going on a Ford these days. And the realignment will change Lawler’s role too. Starting in 2023, Ford will no longer report by geographic region, and will report by Blue, Model e, and Pro. That will give investors a way to measure the profitability of the growing EV business.

Ford plans to sell 2 million EVs a year by 2026.

If the reorganization works it could be good news for Ford shareholders. EV businesses are valued differently than traditional car businesses. Tesla stock trades at 70 times estimated 2023 earnings, while Ford stock trades at 7 times.

Tesla, of course, is growing rapidly, and investors fear that every EV sale Ford makes will result in one less gas-powered vehicle being sold. If Ford can show investors both Model e and Blue can prosper in the future, a better price/earnings ratio could be on the way.

That’s an optimistic take about the future. For now, Wall Street is being conservative. Only 50% of analysts covering Ford stock rate it at Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 58%.

The average analyst price target, however, is almost $21 a share, up 33% from recent levels. At $21 a share, Ford stock would trade for about 9.5 times estimated 2023 earnings.

Ford stock closed up 1% at $15.51 in Wednesday trading. The

S&P 500
and

Dow Jones Industrial Average
rose 1.1% and 1%, respectively.

Ford stock is down about 25% year to date, giving back some of the 136% gain investors realized in 2021.

Write to Al Root at allen.root@dowjones.com

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