Popular automaker Ford Motor Company (F) exceeded the analysts’ revenue and EPS estimates in the second quarter. Its traditional business operations, Ford Blue, earned $2.31 billion, while its Ford Pro commercial business earned $2.39 billion. However, its “Model e” electric vehicle unit lost $1.08 billion in the quarter.
Following the automaker’s second-quarter earnings results, F’s CFO John Lawler said, “The transition to EVs is happening, it just may take a little longer.” The company said it now expects to lose $4.50 billion on the EV business this year, widening losses from roughly $3 billion a year earlier.
Compounding their challenges, F has been compelled to undertake a downward revision of its electric vehicle (EV) production targets as a result of a slow adoption rate. The new projection stipulates a modest production volume of 600,000 EVs annually by 2024, signifying a postponement from its previous forecast of achieving this level by the close of 2023.
Furthermore, what amplifies F's challenges is the distinct withdrawal from the original goal to surpass the remarkable threshold of 2 million EVs per year by 2026, an aspiration that now lingers in uncertainty.
However, F maintains its commitment to ensuring shareholder returns through regular disbursements of dividends. On July 13, 2023, F declared a third-quarter regular dividend of 15 cents per share on the company’s outstanding common and Class B stock, payable on September 1, 2023.
While F’s four-year average dividend yield is 4.30%, the company pays an annual dividend of $0.60, which translates to a yield of 4.65% on the current market price. Over the past three years, the company has raised its dividend at a CAGR of 18.6%.
F’s forward P/E of 7.64x is 53.8% lower than the industry average of 16.54x. Moreover, its forward EV/Sales multiple of 1.00 is 16.7% lower than the industry average of 1.20.
Given this backdrop, let’s look at F’s key financial metrics trends to understand why it could be wise to wait for a better entry point in the stock.
F’s Financial Performance: Analyzing Net Income, ROIC, ROA, and Analyst Price Target
The trend and fluctuations in F’s trailing-12-month net income can be observed from September 2020 to June 2023 based on the data provided:
- September 2020: A net loss of $163 million was recorded.
- December 2020: The net loss deepened to $1.28 billion.
- March 2021: F marked a significant turning point, reporting a net income of $3.98 billion.
- June 2021: The net income slightly decreased to $3.42 billion.
- September 2021: A further decrease to $2.87 billion in net income was noted.
- December 2021: The year closed with an outstanding net income of $17.94 billion.
- March 2022: The net income was $11.57 billion, showing a downward trend.
- June 2022: A marginal rise in net income to $11.67 billion.
- September 2022: The third quarter recorded a lower net income of $9.01 billion.
- December 2022: Ford concluded the year with a net loss of $1.98 billion.
- March 2023: A recovery was observed in the first quarter, with a net income of $2.89 billion.
- June 2023: The upward trend continued with a net income of $4.14 billion.
Reflecting the trend, it's evident that F's financial performance fluctuated over this period. The growth rate from September 2020 to June 2023, considering the last value from the first, reveals considerable progress despite some downturns. However, past fluctuations suggest the need for cautious optimism going forward.
F’s Return on Invested Capital (ROIC) demonstrates a fluctuating trend from September 2020 through June 2023. The following key points summarize the trend in ROIC:
- Starting at 0.005 in September 2020, the ROIC experienced an initial drop to 0.002 by December 2020.
- It then surged during the first quarter of 2021, reaching 0.019 in March 2021.
- The value remained stable through June 2021 but declined slightly towards September 2021, to 0.016.
- A significant increase was observed by year-end 2021, with the ROIC peaking at 0.068.
- However, the first quarter of 2022 saw a dip to 0.041, though this marginally rose again by mid-year to 0.042.
- A gradual decrease occurred towards the end of 2022, with the ROIC even reporting a negative figure, -0.006, by December 2022.
- The initial months of 2023 marked a recovery phase, with the value climbing back to 0.017 by March and further to 0.021 by June.
Over the course of this timeframe, the growth rate calculated by measuring the difference between the last value (June 2023's 0.021) and the first value (September 2020's 0.005) suggests growth of over 300%. Overall, the latest data from 2023 underscores a positive trend for ROIC within the company, though marked by occasionally considerable fluctuations.
Over the past few years, F’s reported Return On Assets (ROA) has seen a general trend of improvement coupled with recurring fluctuations.
- On September 30, 2020, the ROA was -0.10%
- By the end of 2020, the ROA declined further to -0.50%
- In the first quarter of 2021, the firm experienced a turnaround, with the ROA improving to 1.5%. This figure showed slight inconsistency, falling to 1.3% in Q2 and slightly lowering to 1.1% by the end of the third quarter.
- There was a significant improvement by the end of 2021, when the ROA increased dramatically to 7.0%, quickly followed by a decrease in early 2022. The ROA dropped to 4.6% in March and remained steady for the next quarter.
- In the third quarter of 2022, F's ROA slightly decreased to 3.6%, followed by a decline to negative growth at -0.80% by the year-end.
- During the first half of 2023, the ROA rebounded again, hitting 1.1% in March and increasing to 1.6% by June.
Between the start of the period on September 30, 2020, and the last recorded value on June 30, 2023, the ROA increased overall from -0.10% to 1.6%, albeit with regular fluctuations throughout that period.
From the data provided, the trend and fluctuations of the Analyst Price Target for F over a span from November 2021 to August 2023 can be summarized as follows:
Moving Trends:
- From November 2021 till December 2022, there were major swings in the analyst price target, which started at $17 and rose to an all-time high of $22 in February 2022.
- It then bounced back down to $20.5 mid-March 2022, where it stayed flat until April 15, 2022. After that, it went downward, reaching as low as $15 by October 2022.
- It remained around the $15 mark until February 2023, when it dipped to its all-time low of $14.
- An upward trend was observed again starting May 26, 2023, from $12.94 to $14 by July 2023.
Growth Rate:
- From November 2021 until July 2023, the growth rate of the analyst price target for Ford Motor Company calculated by measuring the last value ($14) from the first value ($17) showed a decrease or negative growth of -17.7%.
Latest Data:
- The last value in the series is dated August 7, 2023, where the Analyst Price Target stood at $14, maintaining the same value from the previous report on July 28, 2023.
Fluctuations: The highest value attained by the analyst price target was $22 in February 2022. This represents the peak of the fluctuations in this dataset. Conversely, the lowest point is recorded as $14 in February 2023. This suggests a broad fluctuation range with a significant drop of -36.36% from the peak value. Please note that large fluctuations indicate greater uncertainty or risk. These observations are dependent on further external factors that might impact the company's evaluation over time.
Examining Ford's Share Price Fluctuations: A Six-month Overview from February to August 2023
Analyzing F’s share prices over a period ranging from February 10, 2023, to August 4, 2023, reveals the following trend and growth rate details:
- On February 10, 2023, the share price was $13.27.
- Over the next few weeks, there was a gradual price decrease, with a value of $12.90 on February 17 and a further dip to $12.13 on February 24.
- The stock maintained inconsistency throughout March, dropping to a minimum of $11.52 on March 24, before returning to an upwards pattern by the end of the month at $11.96. -
- April saw fluctuating prices, with a peak of $12.64 on April 14, followed by a decrease to $11.79 by April 28.
- The prices in May showed slight variations, settling around the $11.50-$12.00 range.
- Starting in June, a clear upward trend emerged. The prices rose steadily from $12.29 in early June to $14.62 by the end of the month.
- This upward trajectory continued into July, peaking at $15.17 on July 7, before showing signs of deceleration towards the end of the month, falling to $13.67 by July 28.
- By August 4, it decreased further to $13.10.
The data shows an overall decline in F's share prices until March 2023, followed by a period of fluctuations between $11-$13 until May 2023. Afterward, a pronounced upward trend occurred between June and early July, followed by a slow rise towards August. Thus, F's share price experienced both accelerative and decelerative periods within this timeframe. Here is a chart of F's price over the past 180 days.
Assessing F’s POWR Ratings
F has an overall C rating, translating to a Neutral in our POWR Ratings system. Based on the given data, F’s POWR Ratings have shown improvement over time in the Auto & Vehicle Manufacturers category of stocks, which comprises 56 stocks in total, and F is ranked #27.
Some key episodes in its recent past were:
- Prior to July 22, 2023, F’s POWR Ratings had consistently been C.
- On July 22, 2023, the stock's grade rose to B, marking its highest grade within the dataset.
- However, this rise was short-lived, and it returned to grade C on August 5, 2023.
In terms of rank within the category, F exhibited a general tendency of improvement from February 11, 2023, as it moved from a rank of 32 to 27 by August 5, 2023. Nonetheless, the most critical point to note is that its rank reached 23 during the week of July 29, 2023, when its POWR Ratings momentarily improved to B. However, following this peak, the overall rating and ranking regressed, albeit maintaining a better position than the start of the recorded period.
How does Ford Motor Company (F) Stack Up Against its Peers?
Other stocks in the Auto & Vehicle Manufacturers sector that may be worth considering are Stellantis N.V. (STLA), Mercedes-Benz Group AG (MBGAF), and Honda Motor Co. Ltd. ADR (HMC)-- as they have better POWR Ratings.
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F shares were trading at $12.84 per share on Monday afternoon, down $0.05 (-0.39%). Year-to-date, F has gained 20.12%, versus a 18.49% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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