Ford Motor Company (F - Get Rating) designs, manufactures, and services a range of Ford trucks, sports utility vehicles, electrified vehicles, and Lincoln luxury vehicles. The company operates through the broad segments of Automotive, Mobility, and Ford Credit.

The company surpassed the consensus EPS and revenue estimates in the last quarter. While it surpassed the EPS estimate by 52.6%, it beat the revenue estimate by 7.7%.

The company’s outlook for fiscal 2022 remained unchanged, with its adjusted EBIT expected to come between $11.50 billion to $12.50 billion, representing a growth of 15% to 25% year-over-year. F expects its adjusted free cash flow to come in the range of $5.50 billion to $6.50 billion. It expects a total company-adjusted EBIT margin of 10% and an 8% EBIT margin from EVs by 2026.

On September 19, 2022, F warned investors that the company expects to incur an additional $1 billion in costs during the current quarter due to lingering inflationary pressure and supply chain issues. The company said supply chain constraints have resulted in parts shortages, affecting the production of nearly 40,000 to 45,000 vehicles, mainly its high-margin trucks and SUVs.

F’s stock has declined 42.7% in price year-to-price and 15.9% over the past year to close the last trading session at $11.91. The stock has a trading volume of 85.99 million and an average trading volume of 66.55 million.

Here’s what could influence F’s performance in the upcoming months:

Robust Financials

F’s total revenues increased 50.2% year-over-year to $40.19 billion for the second quarter ended June 30, 2022. The company’s adjusted EBIT increased 253.5% year-over-year to $3.72 billion. Its adjusted net income rose 439% year-over-year to $2.75 billion. In addition, its adjusted EPS came in at $0.68, representing an increase of 423.1% year-over-year.

Mixed Analyst Estimates

Analysts expect F’s EPS for fiscal 2022 to increase 28.4% year-over-year to $2.04. However, its EPS for fiscal 2023 is expected to decline 3.9% year-over-year to $1.96. Its revenue for fiscal 2022 and 2023 is expected to increase 16.4% and 10.3% year-over-year to $146.86 billion and $162.06 billion, respectively.

Discounted Valuation

In terms of its forward non-GAAP P/E, F is trading at 5.83x, 51% lower than the industry average of 11.89x. The stock’s forward non-GAAP PEG of 0.43x is 63.7% lower than the industry average of 1.18x. Its forward P/S is trading at 0.33x, 59% lower than the industry average of 0.80x.

Mixed Profitability

In terms of trailing-12-month gross profit margin, F’s 12.19% is 66.4% lower than the 36.32% industry average. Likewise, its 7.82% trailing-12-month EBIT margin is 4.3% lower than the industry average of 8.17%.

However, its 7.88% trailing-12-month net income margin is 34.6% higher than the 5.86% industry average. Also, its 11.79% trailing-12-month EBITDA margin is 4.7% higher than the industry average of 11.25%.

POWR Ratings Reflect Uncertainty

F has an overall rating of C, equating to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. F has a B grade for Value, in sync with its discounted valuation.

The stock has a C grade for Quality, consistent with its mixed profitability. It has a 1.29 beta justifying its D grade for Stability.

F is ranked #25 out of 64 stocks in the Auto & Vehicle Manufacturers industry. Click here to access F’s ratings for Growth, Momentum, and Sentiment.

Bottom Line

F reported impressive earnings and revenue in the previous quarter due to high demand for its first-generation electric vehicles. However, the company expects its costs to rise significantly in the current quarter due to high inflation and lingering supply chain issues.

Despite the rise in average volumes, we think it could be wise to wait for a better entry point in the stock due to its mixed profitability, low stability, and mixed analyst estimates.

How Does Ford Motor Company (F) Stack Up Against its Peers?

While F has an overall POWR Rating of C, you might want to consider investing in the following Auto & Vehicle Manufacturers stocks with an A (Strong Buy) and B (Buy) rating: Stellantis N.V. (STLA - Get Rating), Volkswagen AG (VWAGY - Get Rating), and Isuzu Motors Limited (ISUZY - Get Rating).

F shares were trading at $12.02 per share on Wednesday morning, up $0.11 (+0.92%). Year-to-date, F has declined -40.86%, versus a -22.15% rise in the benchmark S&P 500 index during the same period.

About the Author: Dipanjan Banchur

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...

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