Is Ford Stock Going to Go Back Up Again

March 16, 2022 Post a Comment

Ford Stock Plunges 10% After Earnings as Reality Sinks In

Shares of the U.S. motorcar titan rose too far, besides fast in contempo months, because that Ford hasn't finished fixing its operations in Europe, Cathay, and South America yet.

Key Points

Last week, Ford reported worse-than-expected results for the 4th quarter of 2021.
While Ford seems to be on the right rail, it hasn't finished turning effectually many of its overseas units.
After pulling back about xxx% from the multidecade high it prepare last month, Ford stock is starting to wait bonny again.

Recently, Ford Motor Company (NYSE:F) has rewarded its long-suffering shareholders handsomely. Prior to the onset of the COVID-19 pandemic, Ford stock had been in a multiyear downtrend and traded for effectually $x. The pandemic made matters worse, causing shares of the storied automaker to briefly plummet below $4.

However, a sharp rebound in Ford's financial results helped the stock recover to nearly $ten by the end of 2020. Over the by five months, continued fiscal comeback and growing excitement about the company's electric vehicle (EV) plans ignited an even bigger rally. Ford shares eventually peaked at a multidecade high of $25.87 in mid-Jan.

F Chart

Ford Motor Company, data by YCharts.

Ford stock started to retreat in late January. It took an even bigger swoop following the visitor's fourth-quarter earnings study, tumbling x% to $17.96 on Friday. This puts the shares at a much more reasonable level relative to Ford'southward electric current turnaround progress.

A shaky stop to 2021

Final October, Ford reported stellar results for the third quarter of 2021. Adjusted earnings per share (EPS) reached $0.51: almost double the analyst consensus. Meanwhile, Ford generated $7.7 billion of adapted free cash flow, cheers to the working uppercase benefit of returning to more normal product rates as the global semiconductor shortage started to ease.

Past dissimilarity, adapted EPS fell to $0.26 in the fourth quarter: $0.15 shy of the analyst consensus. Ford posted an adapted operating margin of v.4% terminal quarter, compared to 8.4% in Q3. Adjusted complimentary greenbacks menstruum remained solidly positive at $2.3 billion.

For the total year, Ford generated an adjusted operating profit of $ten billion, adjusted EPS of $1.59, and $4.half dozen billion of adjusted free cash catamenia on $136.iii billion of acquirement. Earnings and cash flow easily surpassed pre-pandemic levels, despite lower revenue due to supply constraints related to the chip shortage.

On the other paw, Ford lost coin in S America, Europe, and China -- three of its five regional segments -- during 2021. In the fourth quarter, Ford's losses in Europe and Red china increased yr over yr. While direction says the company is making progress on turning around its struggling overseas divisions, there'southward conspicuously a lot of piece of work left to get those units back on rails.

Expecting farther progress in 2022

Ford expects product to subtract twelvemonth over year this quarter, due to connected supply constraints for key components. For example, the automaker is taking downtime for many of its key products this coming week due to parts shortages. Nonetheless, on a full-twelvemonth basis, the visitor anticipates growing wholesale volume ten% to xv% compared to 2021, driving revenue college.

Two Ford Broncos pictured on a steep mountain.

Image source: Ford Motor Company.

This revenue growth should enable Ford to expand its adjusted operating turn a profit to between $11.5 billion and $12.5 billion in 2022, with strong growth in North America more offsetting lower earnings from its finance subsidiary. Ford likewise estimates that adjusted free cash flow will improve to between $v.five billion and $6.five billion.

Looking to 2023 and beyond, Ford stands to do good from easing supply constraints and restructuring efforts outside North America. That should support connected revenue and earnings growth, assisted by Ford's growing portfolio of EVs. The company likewise may have opportunities to cash in on its pale in Rivian and monetize its self-driving chapter, Argo AI.

A healthy pullback

At its peak a few weeks ago, Ford stock traded for 16 times the company'south 2021 adapted EPS of $ane.59. That represented a fairly ambitious valuation compared with its peers, especially given Ford's ongoing struggles in many international markets. As a outcome, I sold over one-half of my Ford shares in December and January.

That said, I'm however hanging on to some of my investment. Ford stock could have substantial upside -- particularly after the recent pullback -- if it tin can become all of its regional subsidiaries back to reasonable levels of profitability.

Indeed, direction's guidance calls for adapted operating profit to ascent xv% to 25% this twelvemonth, which implies adjusted EPS almost $2. Moreover, supply constraints are however weighing on revenue growth, and the company hasn't completed its international restructuring efforts however. With Ford stock sitting at around $18, there'due south more than enough upside potential to compensate investors for the risk that Ford never entirely fixes its overseas operations.

This article represents the opinion of the writer, who may disagree with the "official" recommendation position of a Motley Fool premium advisory service. Nosotros're motley! Questioning an investing thesis -- fifty-fifty one of our own -- helps us all think critically virtually investing and make decisions that aid us become smarter, happier, and richer.

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