Is Ford A Dead Money Investment?

I have been a Ford (F) bull for almost two years now, and I have to admit the stock hasn’t lived up to my expectations. The company has been plagued by several unfortunate events as a result, the stock has remained range-bound and has struggled to break past the $17 mark.

Ford released its Q3 earnings report earlier this week, and although I found the numbers quite satisfying, the stock plunged over 4%. The Blue Oval earnings soared over 90% and came in at $0.45 per share, missing the analysts’ estimate by $0.02. On the revenue front, Ford delivered a nice surprise and delivered $38.1 billion in sales, hugely above the consensus target of $35.07 billion.

It seems like investors weren’t interested in the company’s massive earnings jump and instead focused on the company’s narrow miss.
Although Ford’ CFO Bob Shanks explained over the conference call that the miss was entirely due to higher tax rate than expected, investors punished the stock which was already trading at a very conservative valuation.

After two years, investors may be wondering is Ford a dead money investment or will it actually live up to the expectations in the future. To be honest, I still think the company is nicely run and has a great management team, however given the negative sentiment, it is impossible to predict correctly how Ford’s stock is going to move.

If you only look at the company’s fundamentals, I think Ford is still a buy. But given the unfortunate series of events in the last two years, I don’t think Ford will be able to deliver massive upside in the near future.

On the bright side, sales of the company’s new F-150 pickups are growing massively. The F-150 is Ford’s bread and butter. The new F-150 has an aluminum body panel. The bet on aluminum was a big gamble and resulted in severe supply constraints during the first six months of the year. However, with supply finally catching up to the demand, Ford can finally reap the benefits. Due to the lighter weight of aluminum, the new F-150 has more mileage. As a result, buyers are willing to pay a premium for the pickup. The average transaction price for the F-150 is reported to be $3,000 more than its predecessors. Thus, the soaring profits at Ford aren’t surprising. With two months still to go in 2015, Ford can make the most of the pent-up demand and rake in high profits.


While Ford’s aluminum bet is paying off, it is very difficult to predict the actual movement of the stock. The company has been range-bound over the last two years and will find it hard to break past the $17 mark. However, given that the stock is presently at the lower end of the range spectrum, I think investors can buy the stock for the short-term. I wouldn’t recommend Ford  as a long-term investment unless the company starts delivering on its promises.
Published on Oct 29, 2015
By Ayush Singh

Copyrighted 2020. Content published with author's permission.

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