Ford Motor (F) is one of the worst stocks in the S&P 500 Thursday, plummeting after the automaker fell short of earnings expectations for its second quarter.
In the three months ended June 30, Ford's revenue increased 6% year-over-year to $47.8 billion, buoyed by a nearly 6% rise in automotive revenue to $44.8 billion and a 19% jump in Ford Credit revenue to $3 billion. Meanwhile, its earnings per share (EPS) decreased 35% to 47 cents.
Pressure on Ford's bottom line was due in part to a $1.1 billion loss in its electric vehicle (EV) segment amid "ongoing industrywide pricing pressure on first-generation electric vehicles and lower wholesales."
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The report also showed that Ford's free cash flow, which is the money left over after operating expenses and spending on assets, climbed 10% from the year-ago period to $3.2 billion.
"Customers exercising 'freedom of choice' made Ford the No. 1 gas, No. 2 electric and No. 3 hybrid vehicle brand in the U.S. and the company remains confident in full-year 2024 results, including increasing effectiveness generating cash," the company said in a statement.
The results were mixed compared with analysts' expectations. Wall Street was anticipating total revenue of $47.8 billion and earnings of 68 cents per share, according to MarketWatch.
As a result of its strong cash generation in the first half of the year, Ford raised its full-year free cash flow forecast. The company now anticipates free cash flow in the range of $7.5 billion to $8.5 billion, up from its previous forecast of $6.5 billion to $7.5 billion.
"Our $1 billion increase to adjusted free cash flow guidance for the year underscores our growing confidence in the business," Ford Chief Financial Officer John Lawler said on the company's conference call. "Our balance sheet remains strong with close to $27 billion in cash and $45 billion in liquidity, providing considerable flexibility in a very dynamic environment."
Is Ford stock a buy, sell or hold?
Wall Street is on the sidelines when it comes to Ford, which isn't too unsurprising given the consumer discretionary stock is down more than 18% in the past 12 months.
According to S&P Global Market Intelligence, the consensus analyst target price for F stock is $14.02, representing an upside of about 20% to current levels. Despite the significant implied upside, the consensus recommendation is a Hold. Analysts may very well revise their price targets lower following the earnings miss.
Financial services firm Bernstein is one of the few bullish firms on Ford stock with an Outperform rating (equivalent to a Buy) and a $16 price target.
Still, Bernstein analyst Daniel Roeska says that Ford investors are looking for better performance from the automaker in upcoming quarters. The analyst also notes that Ford did initiate any stock buybacks in the most recent quarter, which could be concerning to shareholders. "The team clearly believes in its mission, but investors likely need more stepping stones to buy into the strategy if they will not be compensated along the way," he adds.
Bernstein's $16 price target represents sits more than 40% above where Ford Motor stock is currently trading.
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