Wednesday, 30 October 2024
by BD Banks
Ford Motor Company (NYSE: F) stock slid 8.9% through 10:40 a.m. ET Tuesday despite beating on the both top and bottom lines in its earnings report last night.
Heading into earnings, analysts forecast the automotive giant would earn $0.47 per share on $41.9 billion. In fact, Ford reported a profit of $0.49 (adjusted for one-time items), and its revenue exceeded expectations as well — $46.2 billion.
So that’s the good news — top- and bottom-line beats. Now, here’s the bad: Ford didn’t really earn $0.49 per share at all.
Because of a $1 billion charge-off for its money-losing Model e electric vehicles division, Ford’s actual net income for the quarter was just $0.22 per share. This was less than half its “adjusted” profit and a 27% decline from last year, despite sales growing more than 5% year over year. On the plus side, free cash flow does appear to have improved. Ford reported $3.2 billion in adjusted free cash flow, and over the last 12 months, its FCF number is about $6.4 billion, nearly twice its reported $3.5 billion in net income.
At a more granular level, Ford’s biggest division, Ford Blue (which sells trucks to consumers) grew sales 3% year over year. Model 3 sales tumbled 33%. Only Ford Pro, which sells to commercial and government customers, saw significant sales growth — 13% — and with profit margins roughly twice those of sales to ordinary truck buyers — 11.6%.
Turning to guidance, Ford declined to predict what generally accepted accounting principles (GAAP) profits it will earn this year, but said operating profits should be about $10 billion, and adjusted free cash flow about 75% of that — $8 billion. Valued on the former, Ford stock costs about 4.3 times 2024 operating earnings, and 5.4x FCF.
The stock’s generous 5.3% dividend yield alone should probably justify either of those valuations. If Ford can just get its earnings growing again (for example, by exiting the money-losing EV venture), I’d have little hesitation about calling this stock a buy.
Before you buy stock in Ford Motor Company, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Ford Motor Company wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $861,121!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of October 28, 2024
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.