Evaluating Ford Stock’s Value Potential Ahead of Q4 Earnings Report

Ford Stock

In a bustling earnings season, this week sees notable releases from major players such as PayPal (NASDAQ:PYPL), Walt Disney (NYSE:DIS), and Ford Motor Company (NYSE:F), all of which have faced market challenges in recent times. Ford, despite rebounding from last year’s lows, struggled throughout 2023, grappling with issues like the United Auto Workers (UAW) strike, the persistent impact of new worker compensation, a slowdown in electric vehicle (EV) sales, and a broader economic downturn. These factors, combined with higher interest rates, led both Ford and rival General Motors (NYSE:GM) to fall out of favor with investors last year.

As we enter 2024, Ford faces similar hurdles, even as expectations of falling interest rates linger. General Motors experienced a surge in its stock last week after an impressive Q4 earnings report. Now, the question arises: can Ford replicate GM’s success in its upcoming Q4 earnings release?

Anticipating Ford’s Q4 Earnings

Analysts predict that Ford’s Q4 revenues will reach $41.38 billion, representing a slight year-over-year decrease of under 1%. The automaker’s earnings per share (EPS) is expected to witness a substantial 74% decline to $0.13, primarily attributed to the lingering impact of the UAW strike during the quarter. In comparison, GM’s operating income also saw a significant decrease in Q4, despite a year-over-year rise in EPS, owing to a favorable base in the corresponding quarter of the previous year.

The UAW strike cast a shadow of uncertainty over automakers, prompting Ford to withdraw its 2023 guidance initially. Although the company later reinstated its outlook, it forecasted an adjusted pre-tax profit between $10 billion to $10.5 billion – below the earlier guidance of $11 billion to $12 billion.

Key Focus Areas in Ford’s Q4 Earnings Report

Beyond headline figures, attention will be on Ford’s 2024 guidance, particularly regarding losses in the EV business (now rebranded as Ford Model e). Additionally, commentary on the long-term profitability of the EV segment will be closely monitored. Insights into the product mix strategy, emphasizing hybrids amid slowing EV sales, and comments on capital allocation will also be crucial aspects of the earnings report.

As General Motors shifts its EV strategy, incorporating plug-in hybrid electric vehicles, Ford’s approach and stance on EV investments will be pivotal. Ford has expressed a cautious approach, potentially allowing flexibility for shareholder returns, similar to GM’s record $10 billion buyback last year.

Ford’s Stock Forecast Ahead of Q4 Earnings

Morgan Stanley analyst Adam Jonas, renowned for his bullish stance on Tesla (TSLA), expresses optimism about Ford, naming it a “top pick” among U.S. automakers. The brokerage assigns a base case target price of $15, with a bull case target of $21. However, the consensus among analysts is more reserved, with a “Hold” rating for the stock. While five analysts rate it as a “Strong Buy” and two as a “Moderate Buy,” seven suggest “Hold,” and three advocate a “Strong Sell.” Ford’s mean target price of $13.52 reflects an 11.3% increase from last Friday’s closing.

Is Ford Stock a Worthwhile Investment?

Despite testing investors’ patience in recent years, Ford’s relatively modest valuations, with a next 12-month price-to-earnings multiple of 8.4x, and an appealing dividend yield of around 5%, position F stock as a potentially attractive value buy. The upcoming 2024 guidance, coupled with a focus on cost cuts and an expected reduction in EV losses, could provide positive momentum for Ford’s profitability in the coming year.

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