Ford Motor Company (F) designs, manufactures, markets, and sells a wide range of Ford trucks, cars, electrified vehicles, sport utility vehicles, and Lincoln luxury vehicles worldwide. The company operates through three business segments: Automotive; Mobility; and Ford Credit.

F delivered solid second-quarter 2022 operating results despite continued supply, economic, and political headwinds. Its total revenues came in at $40.19 billion, up 50.2% year-over-year, and its adjusted EPS grew 423.1% from the year-ago value to $0.68. The company witnessed strong demand for its first generation EVs, the Mustang Mach-E, the Lightning, and the E-transit.

On July 28, F unveiled America’s first electric pickup truck purpose-built for police, the 2023 Ford F-150® Lightning™ Pro Special Service Vehicle. The 2023 Ford F-150 Lightning Pro SSV blends familiar Built Ford Tough® power and performance with the vehicle’s high-tech electric platform and innovation with Ford Pro’s real-time software and support.

The company also plans to advance its Ford+ growth plan. In July, F added battery chemistries and secured contracts locking up 60-gigawatt hours (GWh) of annual battery capacity and raw material sourcing required to ensure a global 600,000 EV run rate by late 2023.

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

The stock has declined 26.2% over the past six months and 43.5% year-to-date to close the last trading session at $12.31.

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

Solid Financials

In the fiscal 2022 second quarter ended June 30, F’s total revenues increased 50.2% year-over-year to $40.19 billion. The company’s operating income amounted to $2.89 billion, compared to a $22 million loss in the prior-year quarter. Its adjusted EBIT grew 253.5% from the prior-year period to $3.72 billion.

In addition, the company’s adjusted net income came in at $2.75 billion, registering an increase of 439% year-over-year. Its adjusted EPS rose 423.1% from the year-ago value to $0.68. Also, its adjusted free cash inflow came in at $3.60 billion, versus the $5.10 billion outflow in the previous year’s quarter.

Mixed Analyst Estimates

Analysts expect the F’s revenues to increase 11.2% year-over-year to $36.93 billion in the fiscal 2022 third quarter (ending September 2022). However, the consensus earnings per share estimate for the ongoing quarter is expected to come at $0.44, indicating a decline of 14.1% from the prior-year period.

Furthermore, the consensus revenue estimate for the fiscal 2022 and 2023 is expected to grow 16.4% and 10.4% year-over-year to $146.86 billion and $162.06 billion, respectively. However, analysts expect the company’s EPS for the fiscal year 2023 to decline 3.1% year-over-year to $1.99.

Discounted Valuation

In terms of forward non-GAAP P/E, F is currently trading at 6.01x, 49.7% lower than the industry average of 11.95x. The stock’s forward Price/Sales ratio of 0.34 compares with an industry average of 0.77x.

Its forward Price/Book of 1.06x is 54.2% lower than the industry average of 2.32x. In addition, its forward Price/Cash Flow of 4.48x is 54.1% lower than the industry average of 9.75x.

Mixed Profitability

F’s trailing-12-month EBITDA margin of 11.79% is 4.8% higher than the industry average of 11.25%. Its trailing-12-month net income margin of 7.88% compares to the industry average of 5.86%. Likewise, the stock’s trailing-12-month levered FCF margin of 9.19% is 410.4% higher than the industry average of 1.80%.

However, the stock’s trailing-12-month EBIT margin of 7.82% is 4.28% lower than the 8.17% industry average. Its trailing-12-month ROTC and ROTA of 4.05% and 4.75% compare to the industry averages of 6.91% and 5.09%, respectively. In addition, its trailing-12-month asset turnover ratio of 0.60% is 42.1% lower than the industry average of 1.03%.

POWR Ratings Don’t Indicate Enough Upside

F has an overall rating of C, equating to a Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. F has a B grade for Value, consistent with its lower-than-industry valuation metrics. It has a C grade for Quality, in sync with its mixed profitability metrics.

Also, the stock has a grade of D for Stability. The stock’s beta of 1.37 justifies the Stability grade.

F is ranked 25 in the D-rated 64-stock Auto & Vehicle Manufacturers industry.

Beyond what I stated above, we have also given F grades for Growth, Sentiment, and Momentum. Get all F ratings here.

Bottom Line

The company reported impressive second-quarter financials, driven by high demand for its first-generation electric vehicles (EVs). However, parts shortages and other supply chain issues continue to affect the automaker’s deliveries and inventories. Ford recently stated that it would spend about $1 billion during the third quarter due to inflation and supply chain issues, further affecting its profit margins.

Given F’s bleak earnings growth estimates, mixed profitability, and low stability, we think it could be wise to wait for a better entry point in the stock.

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

F has an overall POWR Rating of C. One could also check out these other stocks within the Auto & Vehicle Manufacturers industry with a rating of A (Strong Buy): Volkswagen AG (VWAGY), Daimler AG (DDAIF), and Stellantis N.V. (STLA).

F shares fell $0.07 (-0.57%) in premarket trading Monday. Year-to-date, F has declined -39.73%, versus a -21.96% rise in the benchmark S&P 500 index during the same period.

About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...

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