Ford Company Overview
Zacks Rank #5 (Strong Sell) stock Ford Motor Company (F), established by Henry Ford in 1903, is an American automotive manufacturer headquartered in Dearborn, Michigan. Being one of the world’s leading automakers, Ford provides a vast product portfolio of cars, trucks, SUVs, and commercial vehicles, including its luxury Lincoln brand and electric vehicles (EVs).
Ford Earnings Miss Amid EV Weakness, Competition
Checkered EPS Surprise History
Ford’s recent earnings history has been checkered, with some quarters beating, and some missing badly. Presently, the July quarter is in control. F shares stumbled more than 18% on volume turnover nearly four times the norm, after the automaker missed Zacks Consensus estimates by a wide margin of 26.56%. Conversely, fellow legacy automaker General Motors (GM) has beaten Wall Street’s earnings estimates.
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EV Market Slows, Competition is Fierce
An integral reason Ford missed earnings estimates is weakness in its EV segment. Ford has been forced to scale down its EV production amid slowing EV demand. Meanwhile, though EV demand will likely pick up eventually, Tesla (TSLA) dominates the market by a significant margin. Further, many customers who want to avoid diving dive straight into an EV are opting for hybrids from Toyota Motors (TM), leaving Ford out in the cold.
Ford’s relative weakness is illustrated not only in its faltering fundamentals but also in its share price. Tesla and GM are up 62.6% and 57% over the past year, respectively, while Ford lags far behind, down 4.2%.
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Ford Faces Quality Issues
Ford’s struggle to manage warranty expenses has been another sore spot for the automaker. Quality issues in several models from 2016-2021 have led to an $800 million increase in warranty costs. Though management intends to address these issues, they have communicated to shareholders that the problems may not be resolved for more than a year, at the very least. In other words, the warranty issues will cause a bearish overhang in the stock for the foreseeable future.
Bottom Line
Despite its storied history, Ford Motor faces significant headwinds, including missed earnings, slowing EV demand, and increased competition from Tesla and other automakers. Additionally, persistent quality issues will likely weigh on the stock over the coming months.
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