• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing

I Don't See Ford's Stock Accelerating Anytime Soon

Ford posted a quarterly loss in every segment outside of North America.
By DAVE BUTLER
Jan 23, 2019 | 05:47 PM EST
Stocks quotes in this article: F, VLKAY, TSLA

I don't think Ford Motor Co.'s (F) stock will be revving up for a bull run. Looking over Ford's fourth quarter and full year's earnings release, it's clear that the company is no longer deriving the same value from its revenue increases.

Revenue increased 1% year over year to $41.8 billion. Net income on that revenue was actually a loss of $100,000. That's ($0.03) per diluted share. Ford noted the losses included a "negative $0.9 billion non-cash pre-tax mark-to-market adjustment for global pension and OPEB plans." Adjusted earnings were $0.30 a share. Even on an adjusted basis, earnings came in below expectations of $0.32 a share. Ford posted a loss in every segment outside of North America where it seems to be squeaking by on trucks. With concerns over both the European and Asian markets, I'm afraid that Ford is going to be forced to continue relying on SUV sales in the United States.

The year itself demonstrates the eroding performance of the business; which I worry will lack the fuel needed to stoke the stock price in the right direction Full-year revenues increased 2.3% to $160.3 billion, while full year net income decreased roughly 52% to $3.69 billion. On a diluted earnings per share basis, earnings decreased a comparable 52% to $0.92 a share. Frankly, I don't like adjusted earnings. If you incurred pension expenses or factory expenses, that cost you money. It should be reported that way.

The saving graces for Ford are a beautiful balance sheet comprised of $23.1 billion in cash -- meaning the dividend yield of 7% (depending on daily trading activity) is likely safe -- and the interesting development in its "alliance" with Volkswagen (VLKAY) . The details are murky as to what this alliance will mean over the long term, but I suspect they will make attempts to share the costs of tech and platforms for crossovers and cars. 

Overall, I see nothing in the fourth quarter that will drive Ford's stock price up.

Over the last five years, Ford has witnessed a record peak in the auto cycle. Since then, there's been a gradual decline in the company's overall sales per unit. The company's bottom line has been bolstered by strength within lucrative trucks and SUV's, while traditional sedans have been the group to falter. Now, as trucks showed weakness in the fourth quarter, one has to wonder if the run is over. Aside from Tesla (TSLA) , auto stocks do not run at high valuations. In fact, they trade at some of the lowest multiples in the stock market. It can make Ford very tempting right now, but at the same time one must remember that the stock won't experience significant uptick without a major catalyst. Car stocks actually follow earnings -- a mind bending concept these days.

As revenue potential and earnings growth come into question, I don't see Ford's share price doing anything drastic. You have to be prepared to hold your shares and collect the dividend for quite a while, and it could be great long while. Auto companies are usually one of the first things hit by economic slowdowns. It doesn't make a ton of sense to purchase a big expensive pickup truck if times get a tighter. I am in agreement with many that we are not in a recession. But after years of big sales figures, I think the marginal propensity to consume is much lower for autos. Particularly, I think you can only sell trucks at high average transaction prices for so long before the cycle slows down. After a certain point, consumers are going to hold on to those pricey vehicles for awhile before upgrading.

While we might not be in a recession now, we certainly need to be mindful of the possibility in the future. Ten years without an economic downturn is a long time. It's not going to be a big surprise if things start to cool off. Rates (though not as high and all encompassing as many had feared), coupled with the general nature of economics, means it's inevitable. Ford does sell in China and Europe. These two markets are facing economic concerns. It's not easy to cut costs if these markets really start tanking. There will be expenses incurred regarding shuttering production and laying off workers. But the bread and butter most certainly still reside in the United States where their truck lineups are king. Moving forward, January sales results really need to be watched closely. If trucks falter again there could be a sour trend starting. 

It's important to remember that Ford has a lot of capital on hand. The dividend is most likely safe; barring any crazy events. That is what will keep the stock relatively stable. Regarding share price appreciation, I'm skeptical that this one moves much for a while. Will you see the errant jolt as someone takes a big position? Sure you will. That doesn't mean it can find bullish sentiment. If you own this stock, be prepared for a long wait.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication Butler had no position in the securities discussed.

TAGS: Investing

More from Investing

Chevron Is Not Only Greasing the Wheels, It's Turbocharging Them

Jim Collins
Jan 26, 2023 5:07 PM EST

Let's look at why CVX's buyback news is a big deal for investors.

Traders Hold Their Noses and Buy

James "Rev Shark" DePorre
Jan 26, 2023 4:27 PM EST

The dull market got a boost from Tesla, but this is not the kind of action we want to see.

Phillips 66 Looks Like It's on the Right Route

Bruce Kamich
Jan 26, 2023 1:33 PM EST

PSX appears poised for further gains as earnings approach, according to the charts and indicators.

In the Wild World of Crypto, a Wild Bitcoin Play Is the Best Call

Mark Abssy
Jan 26, 2023 1:24 PM EST

The situation for bitcoin investors right now is tough, but as we look at the crypto exchange-traded funds and the digital currency, I see one good 'option.'

The Long-Term Trend of Booz Allen Hamilton Is Bullish

Bruce Kamich
Jan 26, 2023 12:15 PM EST

If the earnings report is bearish, here's what to know.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 03:06 PM EST BOB LANG

    LEAPS Webinar

    This week, I offered a free webinar session talkin...
  • 02:53 PM EST REAL MONEY

    LIVE EVENT: Chris Versace and "Sarge" Guilfoyle Share Their Stock Market Insights

    This Monday, Jan. 30, at 12 p.m., our very own exp...
  • 04:58 PM EST REAL MONEY

    The Latest AAP Podcast!

    Listen in as AAP Tackles Earnings, the Fed, Recess...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login