Ford (NYSE:F) shares rose after the automaker reported better-than-expected earnings and reiterated full-year forecasts. In its fiscal third quarter, the carmaker posted non-GAAP earnings per share of $0.68 and automotive revenue of $37.9 billion. Analysts expected EPS to be $0.44 and sales to be $35.17 billion, both of which were much exceeded. Cash flow from operations increased to $2.9 billion for the quarter, up from $756 million in 2021. The top and bottom lines outperformed expectations despite sluggish sales and supply chain issues in China, where sales fell 22% during the quarter and inflationary pressures on the bottom line.
600,000 EVs Produced Globally by Late 2023
The automaker also reaffirmed its plan to create 600,000 electric vehicles globally each year by late 2023, which was first stated a week barely before earnings.
The Ford+ Plan
The bottom line is that the Ford team executed a very strong second quarter despite supply chain disruptions, new economic headwinds, and heightened uncertainty. CEO Farley stressed that Ford achieved these outcomes through pushing the Ford+ plan, which he described as the company’s greatest potential to create value since the Model T.
Ford+ 3 Fundamental Promises to Customers
Three basic promises to customers are at the heart of Ford+: distinctive and groundbreaking goods and experiences, an always-on engagement with Ford, and an ever-improving post-purchase customer experience powered by software.
Disruptive Technology Leveraging Strengths
The Ford+ program and the company’s decision to reorganize into three distinct categories, Model E, Ford Blue, and Ford Pro, will be the two key drivers of Ford’s growth. In my opinion, this is a significant win for the stock and the company. By dividing the organization into three distinct sectors, each team’s clarity of purpose and focus should improve dramatically. Each group’s particular goal emphasis should drive a significantly faster clock speed, allowing Ford to make decisions much faster, resulting in a more efficient design and cost structure. Ford Credit is also showing no symptoms of decline at the moment.
Ford Credit
Based on current statistics, the business expects excellent auction values and low return rates to continue. Let’s take a look at Ford’s current fundamental situation.
Ford’s solid fundamentals
The fundamentals remain fairly appealing even with the stock up 37% this month. Ford’s forward P/E ratio of 7.61 is roughly half the current S&P 500 forward P/E ratio of 17.5. The company has an incredible PEG ratio of 0.64; anything less than one is considered incredibly undervalued. Furthermore, Ford is trading at a P/FCF ratio of 11.58, while anything less than 15 is considered inexpensive; talk about margin of safety. Moreover, According to Seeking Alpha’s Quant analysis, Ford is a Buy with A ratings for valuation, growth, and profitability.
If there was ever a buying opportunity in Ford with great fundamentals and a strong growth story, this is it. On top of that, the most significant and eye-opening step made by Ford was a 50% increase in dividends!
Ford is once again a dividend growth play
This is kind of hilarious because there was a major argument in my previous article about Ford maybe not paying a dividend this quarter! Ha! Surprise, surprise, surprise, as Gomer Pile would say! Ford Motor Company increased its quarterly dividend by 50% to $0.15. Ford Motor declared a quarterly dividend of $0.15 per share, a 50% increase from the previous dividend of $0.10.
Ladies and gentlemen, this is the frosting on the cake. With a forward yield of 4.55%, the dividend is currently payable on September 1 for stockholders of record on August 11, ex-div August 10. Right now, the stock is a good buy. Now I’d like to devote my attention to the current macroeconomic situation.
The Bottom Line
Our instincts tell us to abandon a sinking ship. This survival strategy has an impact on how we invest. The stampede for the exits creates the opportunity to buy a fundamentally sound company like Ford at a discount. Take advantage if you have some dry powder and a long-term time horizon. Furthermore, after years of hard effort, Ford is swamped with demand for the Model T maker’s first-generation EVs, the Mustang Mach-E, Lightning, and E-Transit. These goods are currently available in the market, and the company has large multi-year order banks.
You can’t do much better than Ford selling them as fast as they can build them. In addition, the company has a fortress balance sheet and rising free cash flows.
Featured Image: Megapixl ©Ricochet69
