Ford stock (F) has been on a powerful run since it bottomed out near $11 last month. This doesn't necessarily mean that the rally is finished, however. There's likely more room to run, as Ford's recently reported results affirm the company's fiscal strength. I am bullish on Ford stock.
Ford is a classic American automaker. In some ways, Ford's financial health is a good gauge of how the U.S. economy is doing overall. If Ford is thriving, that's a positive sign. When Ford is struggling, however, this suggests that the American economy may be in rough shape.
In this context, Ford's recently issued second-quarter 2022 financial results have implications beyond the company itself. Is the American consumer willing and able to buy a new vehicle despite the challenges of inflation and a possible recession? Thankfully, the answer is yes, as Ford topped Wall Street's expectations and delivered outstanding quarterly numbers - and with that, it looks like Ford stock still has plenty of gas left in the tank.
It's Still Not Too Late to Consider Buying Ford StockIt's probably tempting to think that you missed out on a terrific opportunity. After all, Ford stock recently bottomed near $11 before rocketing to $15 in just a couple of weeks. It was spectacular to watch Ford stock go up 3% to 5% day after day, but it was undoubtedly disappointing if you were sitting on the sidelines. Still, it's not too late to think about making your move as an investor.
First of all, consider how much higher Ford stock can move from here. It was worth $25 earlier this year, so there's a "gap to fill," as market technicians like to say. Furthermore, just because a stock has moved higher recently, this doesn't necessarily mean that it's expensive. Currently, Ford's trailing 12-month price-to-earnings (P/E) ratio is 5.2x, which is extremely low, so there's little need to worry about Ford stock being overvalued now.
Meanwhile, income-focused investors should be glad to know that Ford offers a forward annual dividend yield of 2.61%. Moreover, the company said it plans to increase its quarterly dividend to $0.15 per share. This represents a significant milestone, as this dividend will be the amount that Ford paid prior to the onset of the COVID-19 pandemic.
Also, this is a great time to consider an investment in Ford, as the company is in the middle of a crucial transition. Specifically, the automaker is reorganizing into three separate but related businesses. These will be Ford Blue, a segment dedicated to internal combustion engine (ICE) vehicle production; Model e, which will be Ford's electric vehicle (EV) business; and Ford Pro, the company's fleet unit.
This clearly isn't the Ford of previous generations. The company now plans to produce two million EVs by the end of 2026. So really, you didn't "miss the bus" if you're just buying Ford stock now. Ford is just turning the page now to its next chapter, which could involve robust EV sales but also a strong focus on ICE vehicles and fleets.
Ford's Financial Results Should Reassure InvestorsTo reiterate, Ford's Q2-2022 results were high stakes because they're a gauge of how the nation's economy is doing. It's great news, then, that Ford knocked it out of the park with terrific top and bottom-line results. Investors ought to feel reassured that Ford is in excellent shape as a business and can remain confident that Ford stock has a good chance of continuing to move higher over the long term.
Starting with the top line, Ford reported $37.91 billion in second-quarter 2022 revenue, a vast improvement over the $24.13 billion from the year-earlier quarter. This result also beat the consensus estimate of $34.32 billion.
Focusing on the bottom-line results, Ford posted $667 million in net income, a substantial increase over the $561 million reported in 2021's second quarter. Additionally, Ford's adjusted earnings per share (EPS) of $0.68 demonstrated a vast improvement over the year-earlier quarter's $0.12 while also easily beating the consensus estimate of $0.45.
On top of all that, Ford improved its capital position. The company had cash, cash equivalents, and restricted cash totaling $26.16 billion at the end of Q2 2022. This figure is better than the $20.13 billion that Ford had reported at the end of 2021's second quarter.
Wall Street's Take on Ford StockTurning to Wall Street, Ford has a Hold consensus rating based on five Buys, 11 Holds, and one Sell assigned in the past three months. The average Ford price target is $16.08, implying 6.1% upside potential.
Don't Obsess About Timing if Thinking about Buying Ford StockThere's an old saying among investors: Focus on "time in the market," not "timing the market." If you sit on the sidelines for too long, waiting for a perfect entry point with Ford stock, you may end up missing out on substantial gains. Instead of profits, you'd only have regrets.
Instead, consider the value proposition as Ford stock trades at an ultra-low valuation multiple. Besides, Ford is transitioning into a diversified automaker, and the company's Street-beating quarterly results speak for themselves. So, don't be afraid to consider looking into Ford stock.
Shares of auto giant Ford (NYSE: F) have rallied nearly 36% over the past month and are up over 16% since the company announced its second-quarter results last week. That said, the stock is still in the red on a year-to-date basis due to macro headwinds. Ford smashed analysts’ expectations for the second quarter and reaffirmed its full-year guidance, despite supply chain snags and macro challenges. Moreover, the company hiked its quarterly dividend to $0.15, bringing it back to pre-pandemic levels. However, most Wall Street analysts are on the sidelines and see limited upside in the stock price from current levels.
Ford’s Reorganization Will Ensure Future GrowthFord is reorganizing its business into three automotive business units, Ford Blue – focused on the legacy internal-combustion vehicles (ICE), Ford Model e – focused on electric vehicles (EVs), and the development of connected vehicle technologies, and Ford Pro – dedicated to commercial vehicles.
Ford’s reorganization efforts will help it accelerate the development and production of EVs. The company is experiencing strong demand for its first-generation EVs – the Mustang Mach-E SUV, the F-150 Lightning pickup truck, and the E-Transit van. The company is on track to reach an annual run rate of 600,000 EVs by the end of 2023. Furthermore, Ford is working toward producing 2 million EVs annually by late 2026.
Given the shortage of battery supplies faced by EV makers, Ford has secured 70% of the battery capacity needed to support its 2026 production goal. The company is also focused on improving its productivity and aims to deliver an overall adjusted EBIT margin of 10% and an EV EBIT margin of 8% by 2026.
Majority of the Analysts are on the SidelinesFollowing the print, Deutsche Bank analyst Emmanuel Rosner increased his price target for Ford stock to $13 from $12 and maintained a Hold rating. Rosner feels that the company's Q2 results reflected solid operational execution backed by improved volumes and continued pricing benefits. However, the analyst pointed out that the earnings beat was also due to one-time gains in the range of $300 million to $400 million, exceptionally robust volumes, and a favorable mix.
Meanwhile, Benchmark analyst Michael Ward lowered his price target for Ford stock to $23 from $25 but maintained a Buy rating. Ward increased his 2022 estimates to reflect the upbeat Q2 performance. However, the analyst lowered his 2023 estimates due to lower expected earnings from Ford Credit.
Overall, Ward expects Ford and the broader auto sector to outperform the global economy over the next 1 to 2 years based on a better cost position, competitive products, a strong balance sheet, and robust demand.
On TipRanks, the Street has a Hold consensus rating based on five Buys, 11 Holds, and one Sell. The average price target of $16.02 implies 4.43% upside potential from current levels.
ConclusionLike other automakers, Ford is exposed to near-term headwinds, including supply chain issues and macro challenges. Following the recent rally in Ford stock, several analysts see limited upside potential and prefer to remain on the sidelines. That said, Ford’s aggressive investments to ramp up its EV business are expected to drive its long-term growth.
As per TipRanks Smart Score System, Ford earns an eight out of 10, indicating the stock could outperform the broader market.