Key takeaways
- Ford has announced a long-term partnership with Red Bull as the automaker returns to F1 racing
- The company also announced a special dividend for investors after a profitable gain from the sale of millions of Rivian shares
- However, Ford’s recent earnings report fell short of expectations, causing the stock price to fall
Ford has been in the news more than once in the last week due to major announcements that shareholders may find exciting. The automaker revealed it would return to F1 racing thanks to a new partnership with Red Bull and said it would pay out a special dividend to stockholders.
Despite these seemingly positive announcements, the company’s recent earnings report missed expectations. We’ll look at what these announcements mean for the company. If you’re interested in gaining exposure to the auto industry, consider how Q.ai Investment Kits may fit into your portfolio strategy.
Red Bull Ford Partnership
The Oracle Red Bull Racing season started with an announcement of their “long-term strategic technical partnership” with Ford’s return to F1 racing. In the past, Ford has accomplished ten constructors’ championships and 13 drivers’ championships.
The new partnership between the two companies is focused on the next-gen hybrid power unit engines that will be supplied to both Red Bull and AlphaTauri. While this will officially occur in 2026 and beyond, the development of the engines will start in 2023.
Ford has expressed they are excited since the platform is cost-effective and allows them to “innovate, share ideas and technologies.” On the other side of the partnership, Red Bull benefits from working with a well-known U.S. brand with extensive OEM experience.
The engine will be based around the current turbocharged 1.6-liter power unit, feature more electrical power and use 100% sustainable fuels. Ford is bringing their battery cell and electric motor technology to the table and will assist with the power unit control software and analytics.
Both brands will undoubtedly benefit from this mutual partnership as they engage with millions of fans and new customers worldwide.
Ford’s Earnings and Special Dividend
Ford reported their fourth-quarter earnings results recently, missing Wall Street’s expectations. Management noted that “execution issues” caused the company’s problems. CEO Jim Farley shared on the call, “We left about $2 billion in profits on the table that were within our control, and we’re going to correct that with improved execution and performance.”
However, the bad news did not stop there. The electric vehicle side for Ford still needs to be more profitable. In response to Tesla’s price cuts, Ford cut costs of the electric Mustang Mach-E crossover, the company’s top-selling electric vehicle.
Ford’s stock did drop after the earnings results were released on February 2, 2023. It closed at $14.32 that day, then opened at $13.05 on February 3, 2023. As of close on February 6, 2023, the price has not recovered and sits at $13.14.
Fortunately, the earnings report was not completely negative. A special dividend was announced for $0.65 per share. Stockholders on record as of February 13, 2023, with an ex-dividend date of February 10, 2023, will receive a dividend payment on March 1, 2023.
A special dividend is rare in today’s market, and a company will provide one for numerous reasons. The most common include when a company has large amounts of cash on hand and wants to reward shareholders or if there is restructuring within the company that results in raising unneeded cash.
This dividend is related to Ford selling most of its ownership stake in the new electric vehicle company, Rivian. The automaker’s annual report shows that Ford sold 91 million shares of Rivian in 2022. This sale resulted in a gain of $1.8 billion. A large majority of the ownership stake was sold, but roughly 11 million of its initial 101.9 million shares are still in possession.
There are currently no set plans for the remaining shares.
Investing in the Auto Industry in 2023
The future of electric vehicles (EVs) in the U.S. is expected to grow as the country focuses on going green. The country’s largest vehicle manufacturers, including Ford and GM, have made pledges to show their dedication to the emerging industry.
Ford vows to sell only electric cars in Europe by 2030, and GM will sell only zero-emission vehicles by 2035. The market is showing solid signs of growth over the next few years, so consumer dollars will likely follow.
Investing Directly in EVs
The production of electric vehicles involves multiple industries. If you include autonomous driving, then the list grows. Investors can invest directly in automakers of electric vehicles by purchasing shares in companies like Tesla or Ford.
Exchange-traded funds like Global X Autonomous & Electric Vehicles ETF (DRIV) provide more diversification since the fund holds stocks not just in EVs but also in semiconductor companies, tech giants and other components of EVs.
Investors can also use the Clean Tech Kit from Q.ai to simplify the process of investing in this sector.
Indirect Investing
The option of indirect investments is present but requires due diligence to learn about other industries affected by EV growth. Two potential areas are EV batteries and materials needed.
GM recently announced an investment of $650 million in Lithium Americas to develop a mine in Nevada for materials that are best for building EV batteries. The number of materials is the biggest to date and will supply enough materials for GM to produce one million electric vehicles annually.
As more vehicles rely on new EV batteries, the growing concern is charging stations are replacing gas stations across the country. Investors should understand this sector is volatile as new companies emerge and old companies fall to the wayside. QuantumScape, backed by Bill Gates, is a prime example of the level of volatility to expect.
Using artificial intelligence when investing can be beneficial since AI affects multiple corners of the market.
Bottom Line
With the spotlight on Ford, some investors are stuck on the sidelines waiting for a pullback, while others are hoping for a profitable year. Regardless, current shareholders will likely be happy with Ford’s most recent announcements.
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