Ford Motor Co. (NYSE:F)

The period under review demonstrates significant fluctuations in financial performance as measured by economic profit. While net operating profit after taxes (NOPAT) experienced substantial volatility, invested capital generally increased over the five-year span. The cost of capital remained relatively stable, with a slight decrease observed in the most recent year.

Net Operating Profit After Taxes (NOPAT)

NOPAT exhibited a dramatic recovery from a loss of US$428 million in 2020 to a peak of US$11,380 million in 2021. However, NOPAT declined significantly in 2022 to US$2,786 million, followed by a modest increase in 2023 to US$3,005 million. A further substantial increase was observed in 2024, reaching US$6,733 million. This indicates considerable operational variability.

Cost of Capital

The cost of capital increased from 6.54% in 2020 to 8.53% in 2021, reflecting potentially changing market conditions or risk assessments. It then decreased slightly to 8.13% in 2022 and 8.23% in 2023 before falling to 7.06% in 2024. This suggests a potential easing of financing costs or a reassessment of the company’s risk profile in the latest period.

Invested Capital

Invested capital decreased from US$170,559 million in 2020 to US$160,105 million in 2021. It then experienced a moderate increase to US$164,218 million in 2022, continuing to rise to US$173,985 million in 2023 and reaching US$186,730 million in 2024. This upward trend suggests ongoing investment in the business.

Economic Profit

Economic profit remained negative throughout the entire period, indicating that the company’s returns on invested capital were consistently below its cost of capital. The largest loss occurred in 2020 at US$11,587 million, followed by US$2,276 million in 2021. Losses remained substantial in 2022, 2023, and 2024, at US$10,563 million, US$11,314 million, and US$6,456 million respectively. While the magnitude of the loss decreased in 2024, the continued negative economic profit suggests a need to improve capital allocation or operational efficiency to generate returns exceeding the cost of capital.

In summary, despite improvements in NOPAT and increases in invested capital, the company consistently failed to generate economic profit over the observed period. The reduction in the economic loss in 2024 is a positive sign, but sustained improvement will be necessary to achieve positive economic profit.

Net Income (Loss) Attributable to Ford Motor Company

There is significant volatility in the net income figures over the five-year span. The company experienced a substantial loss of $1,279 million at the end of 2020, followed by a remarkable recovery yielding a profit of $17,937 million in 2021. However, this was not sustained as a loss of $1,981 million was recorded again in 2022. The subsequent years show a positive trend with profits of $4,347 million in 2023 and $5,879 million in 2024, indicating improving profitability.

Net Operating Profit After Taxes (NOPAT)

NOPAT mirrors the patterns observed in net income but with less pronounced fluctuations. The figure was negative at -$428 million in 2020 but then increased sharply to $11,380 million in 2021. It declined substantially to $2,786 million in 2022 but then remained relatively steady with a slight increase to $3,005 million in 2023. In 2024, NOPAT shows a significant rise to $6,733 million, suggesting improved operational efficiency and profitability.

Overall Trends and Insights

The company's financial performance exhibits considerable cyclicality and recovery efforts throughout the reviewed period. After an initial loss in 2020, both profitability metrics surged in 2021 but could not be sustained into 2022. The recovery from 2022 onwards is steady, with both net income and NOPAT demonstrating growth, indicating improving operational results and successful management initiatives to increase profitability. By 2024, the positive momentum appears to strengthen, reflecting a more stable and profitable position.

Provision for (benefit from) income taxes

The provision for income taxes demonstrates significant volatility across the analyzed periods. In 2020, the provision was positive at 160 million US dollars, indicating tax expenses. This shifted dramatically in 2021 and 2022, where the company recorded negative provisions of -130 million and -864 million US dollars, respectively, suggesting benefits or tax credits during these years. Although still negative in 2023 at -362 million US dollars, the magnitude of the benefit decreased. In 2024, a notable reversal occurred, with the provision turning positive again to 1339 million US dollars, indicating substantial tax expenses compared to prior years.

Cash operating taxes

Cash operating taxes also varied markedly over the five-year horizon. The value was positive at 680 million US dollars in 2020, before plunging to a negative figure of -862 million in 2021, implying a cash inflow or tax refunds. In 2022, there was a significant increase to 2693 million US dollars, representing a sharp rise in cash outflows for taxes. This declined in subsequent years to 1245 million in 2023 and further to 918 million US dollars in 2024, indicating a reduction but remaining substantial compared to 2020 levels.

Overall insight

The tax-related figures exhibit considerable fluctuations, with periods of tax benefits transitioning into years of considerable tax expenses. The sharp negative provisions and negative cash operating taxes in 2021 suggest one-off tax credits or adjustments which were not sustained. The substantial increase in 2024's provision for income taxes corresponds with a more moderate cash tax payment relative to the peak in 2022. This pattern reflects a volatile tax environment or changing profitability and tax strategy within the company, which may warrant further investigation to understand the underlying causes.

The financial data over the five-year period reveals several notable trends in the company's financial structure, specifically concerning its debt, equity, and invested capital.

Total Reported Debt & Leases

This metric decreased significantly from 162,998 million USD in 2020 to 139,485 million USD in 2021, indicating a notable reduction in debt and lease obligations. However, from 2021 onward, the debt level began rising again, reaching 160,862 million USD in 2024. This upward trend suggests increased borrowing or lease commitments over the last three years after the initial reduction.

Equity Attributable to Ford Motor Company

Equity experienced strong growth from 30,690 million USD in 2020 to 48,519 million USD in 2021, reflecting an improvement in the company's net asset base. However, equity declined slightly in the subsequent years, dropping to 43,242 million USD in 2022 and further to 42,773 million USD in 2023, before a modest recovery to 44,835 million USD in 2024. This fluctuation could indicate variable profitability, retained earnings impact, or other equity adjustments during the period.

Invested Capital

The invested capital showed a downward movement from 170,559 million USD in 2020 to 160,105 million USD in 2021, followed by a steady increase in subsequent years to reach 186,730 million USD in 2024. This rising trend from 2021 onward suggests continued investment in the company's operations, assets, or growth initiatives that may contribute to future revenue generation.

Overall, the data depicts a company that initially reduced its debt and invested capital while increasing equity in 2021 but then transitioned into a phase of expanding debt and invested capital with relatively stable but fluctuating equity levels through 2024. The increase in invested capital alongside rising debt could imply strategic investments financed partly by debt. The equity trends warrant further investigation to understand the factors affecting net asset value changes.

The period under review demonstrates a fluctuating, yet generally negative, economic profit performance. Invested capital exhibits an overall increasing trend, while the economic spread ratio reveals the company’s ability to generate returns exceeding its cost of capital.

Economic Profit

Economic profit is consistently negative across the examined timeframe. While a notable improvement occurred between 2020 and 2021, moving from a loss of US$11,587 million to US$2,276 million, subsequent years show a return to substantial losses. The largest loss is observed in 2020, followed by 2022 and 2023. The most recent year, 2024, shows a reduction in the magnitude of the loss, reaching US$6,456 million, indicating a potential, albeit limited, positive shift.

Invested Capital

Invested capital decreased from US$170,559 million in 2020 to US$160,105 million in 2021. However, from 2021 onwards, a consistent upward trend is observed, reaching US$186,730 million in 2024. This suggests increasing investment in the business over the latter part of the period. The increase in invested capital does not correlate with improved economic profit.

Economic Spread Ratio

The economic spread ratio is negative throughout the period, indicating that returns on invested capital are less than the cost of capital. The ratio fluctuates, with a peak (least negative) of -1.42% in 2021, coinciding with the smallest economic loss. The ratio is most negative in 2020 at -6.79% and remains relatively stable around -6.5% in 2022 and 2023. A noticeable improvement is seen in 2024, with the ratio increasing to -3.46%, suggesting a narrowing gap between returns and the cost of capital, though still remaining negative.

In summary, despite increasing investment, the company continues to experience negative economic profit. The economic spread ratio, while improving in the most recent year, remains negative, indicating a need to improve profitability relative to the capital employed.

The economic profit margin exhibited fluctuations over the five-year period. While showing improvement towards the end of the period, the company consistently operated at an economic loss, as indicated by negative economic profit values throughout the observed timeframe.

Economic Profit

Economic profit demonstrated considerable volatility. Beginning with a substantial loss of US$11,587 million in 2020, it improved significantly to a loss of US$2,276 million in 2021. However, this improvement was not sustained, with losses increasing to US$10,563 million in 2022 and US$11,314 million in 2023. A notable reduction in the economic loss occurred in 2024, decreasing to US$6,456 million.

Adjusted Company Revenues (Excluding Ford Credit)

Adjusted company revenues excluding Ford Credit consistently increased throughout the period. Revenues rose from US$116,379 million in 2020 to US$126,580 million in 2021, then to US$149,334 million in 2022, US$166,180 million in 2023, and finally reaching US$173,381 million in 2024. This represents a cumulative increase of approximately 49.2% over the five years.

Economic Profit Margin

The economic profit margin, calculated as a percentage, reflected the relationship between economic profit and adjusted revenues. In 2020, the margin was -9.96%. It improved to -1.80% in 2021, but then deteriorated to -7.07% in 2022 and -6.81% in 2023. The most significant improvement occurred in 2024, with the margin increasing to -3.72%. Despite this improvement, the margin remained negative, indicating that the company’s return on capital employed was less than its cost of capital throughout the period. The increasing revenue did not translate into economic profit due to the magnitude of the economic loss.

The trend suggests that while revenue growth was consistent, the company struggled to generate economic profit. The improvement in the economic profit margin in 2024, despite continued economic loss, indicates a potential positive shift in the relationship between revenues and the cost of capital, though further investigation would be needed to confirm this.