By Michael Entner-Gómez | Digital Transformation Officer | Entner Consulting Group, LLC.
Ford Motor Company, a stalwart in the automotive industry, is currently trading extremely close to its 52-week low at $9.67. This situation begs a deep dive into the factors influencing the company's stock performance:
💵 Analyzing Ford's Mixed Q3 Results
Ford's third-quarter results present a mixed bag. An 11% increase in revenue from the previous year surpasses estimated figures, yet the earnings per share tell a different story, coming in at 39 cents compared to the anticipated 45 cents. This discrepancy between revenue growth and earnings shortfall is a key factor in investor skepticism.
💵 The Withdrawal of 2023 Guidance
Adding to the concern is Ford's recent withdrawal of its 2023 financial guidance. Coupled with postponing a substantial $12 billion earmarked for EV investments, this move signals potential uncertainty about Ford's future trajectory and has notably dented investor confidence.
💵 Challenges in the EV Segment
Ford's Model e segment, dedicated to electric vehicles, reported a 44% year-over-year increase in wholesale unit sales. However, it's not all good news: the segment faced an EBIT loss of $1.3 billion, contributing to a hefty year-to-date loss of $3.1 billion. This raises questions about the profitability and sustainability of Ford's electric ventures.
💵 The Impact of Rising Labor Costs
Labor costs have exerted significant pressure on Ford's financials. The recent agreement with the United Auto Workers (UAW) includes a 25% wage increase and additional benefits, boosting employee welfare but simultaneously impacting Ford's profitability. The deal has escalated per-vehicle costs by an estimated $850 to $900, not to mention the strain from warranty-related expenses, rising interest rates, and geopolitical tensions.
💵 Earnings and Guidance Concerns
Ford's Q3 earnings report missing consensus estimates and the subsequent withdrawal of profit guidance for 2023 paints a cautious picture. There's also a noted hesitation regarding EV demand, further delaying a $12 billion investment in EV production capacity.
💵 The Ford+ Transformation and Resilient Legacy Business
Despite these challenges, Ford's legacy business remains resilient, with notable pre-tax profits in the third quarter. The company's Ford+ transformation plan is geared towards growth and value creation, focusing on improving margins and a robust product portfolio, including the iconic F-150.
💵 Dividend Yield in an Upheaval Market
With an attractive forward dividend yield of over 6%, Ford remains a compelling option for investors. However, the industry is facing significant shifts, particularly with Tesla's aggressive pricing strategy challenging Ford's market position.
🔍 The Road Ahead: Restructuring for Success
Ford's current situation combines internal company dynamics with external market forces, shaping its stock valuation. The pressing question is how Ford can pivot to positively drive its stock value. With a P/E ratio of 6.32 indicating present value and a market capitalization of $38.1B, it seems the formula for success could lie in a radical restructuring, focusing on a strategic mix of their flagship products and a strong push in the PHEV market: (F150+Maverick+Bronco)+PHEV-MachE=SUCCESS.
[Full Transparency: I'm long on Ford, holding 10,500 shares as of 11/10/23]