Ford Motor Company (F) is a global automobile manufacturer and is among the most prominent in the United States. The firm has two brand names – Ford and Lincoln. It has a wide range of products, from trucks and SUVs to sports cars and electric vehicles.
2019 and 2020 have both been rough years for Ford. In 2020, a net loss of $1.28 billion was reported. However, in 2021, Ford has made a strong comeback, with its shares having gained over 120% year-to-date. I am bullish on Ford stock. (See Analysts’ Top Stocks on TipRanks).
Interesting Business News
Ford announced its U.S. sales for October 2021, which was 175,918 vehicles, down 4% compared to the same period last year. However, it was still an improvement over September’s total number of 156,614 vehicles. For a second straight month, Ford was the top-selling U.S. automaker. This was attributed to expanding inventories and new products. In October, Ford sold 14,062 electrified vehicles, up 195% over last year. It was also reported that Ford brand SUVs posted their best October retail sales in 21 years. The F-series and the Lincoln brand SUV sales were very strong.
I believe that Ford’s new products can support strong sales in the coming quarters. In addition, Ford is not neglecting the electrification of its commercial vehicles such as the E-Transit, the electric version of its best-selling commercial van.
In late September 2021, Ford announced plans to build a Mega Campus in Tennessee and twin battery plants in Kentucky.
Ford and SK Innovation plan to invest $11.4 billion with the goals of creating 11,000 Jobs and powering the new lineup of Ford and Lincoln EVs. This deal with SK Innovation as a business partner shows Ford’s commitment and strategic decision to invest in the future of electric vehicles.
Ford’s Executive Chair, Bill Ford, said, “This is a transformative moment where Ford will lead America’s transition to electric vehicles and usher in a new era of clean, carbon-neutral manufacturing.”
He then continued, “With this investment and a spirit of innovation, we can achieve goals once thought mutually exclusive – protect our planet, build great electric vehicles Americans will love and contribute to our nation’s prosperity.”
Jim Farley, Ford President and CEO, said, “This is our moment – our biggest investment ever – to help build a better future for America.”
Ford is also supporting the future of autonomous vehicles.
In mid-September 2021, Ford announced that “Ford Motor Company, Argo AI and Walmart are working together to launch an autonomous vehicle delivery service in Miami, Austin, Texas, and Washington, D.C. — Walmart’s first multi-city autonomous delivery collaboration in the U.S. The last-mile delivery service will use Ford self-driving test vehicles equipped with the Argo AI Self-Driving System to deliver Walmart orders to customers.”
Another key catalyst that can move the Ford stock now is the release of its third-quarter 2021 results, which was a strong earnings report.
Third-Quarter Results
For the third quarter of 2021, Ford reported better than expected EPS and revenue.
The adjusted EPS of 51 cents per share was higher than the adjusted 27 cents per share expected, and the automotive revenue of $33.21 billion was higher than the $32.54 billion expected. One of the most important factors on top of the strong earnings was that the automotive company increased its annual guidance for the second time in 2021.
Ford now expects adjusted earnings between $10.5 billion and $11.5 billion, higher than the previous estimate from between $9 billion and $10 billion.
The positive news should support Ford’s stock price, which seems to neglect the global chips shortage completely. Not all things are rosy, though, for Ford.
High Debt Is a High Risk
Ford has a cash-to-debt ratio of 0.32 and a Debt-to-Equity ratio of 3.95.
Ford Motor has recognized that it must focus on strengthening its balance sheet, announcing plans to introduce a sustainable financing framework, and lowering its debt level. The company has decided to repurchase up to $5 billion of its higher-cost debt and reduce it.
Valuation
Ford stock is relatively undervalued. The price-to-sales ratio (TTM) for Ford, the Auto & Truck Manufacturers industry, and Consumer Discretionary Sector are 0.59, 3.79, and 2.98, respectively.
The price-to-book ratio also shows that F stock is relatively cheap. Its price-to-book figure of 2.18 is lower than the price-to-book ratios of 19.42 and 11.06 for its industry and sector, respectively.
Wall Steet’s Take
Turning to Wall Street, Ford has a Moderate Buy consensus rating, based on eight Buys, two Holds, and two Sells assigned in the past three months. The average Ford price target of $18.08 implies 6.9% downside potential.
Disclosure: At the time of publication, Stavros Georgiadis, CFA did not have a position in any of the securities mentioned in this article.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of Tipranks or its affiliates, and should be considered for informational purposes only. Tipranks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. Tipranks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by Tipranks or its affiliates. Past performance is not indicative of future results, prices or performance.
