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Ford (F) to Fully Absorb Tariff, Declares No Price Hike

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Ford Motor Company (F - Free Report) has no recent plan to increase prices of imported vehicle lineups in China, including high-margin luxury Lincoln models, per Reuters. This decision directs that the company is going to absorb additional tariffs on U.S.-manufactured automobiles, beginning Jul 6.

Earlier, in May, Ford and Lincoln reduced prices of imported models in China. The decision was taken after the Chinese government announced tariff cuts for automobiles, effective Jul 1. However, with Trump's tariff implementation on $34-billion Chinese imports, China recently announced an additional 25% levy on 545 American products that includes U.S.-produced vehicles.

Ford’s decision is expected to hurt its profit margins, which is already witnessing sluggish sales in the largest automotive market, China. In the first half of 2018, the company’s sales declined 25% to 400,443 vehicles compared with the year-ago period. Per LMC Automotive, this marked the biggest first-half percentage decline in the country since 2001.

Ford Motor Company Price and Consensus

At present, all the Lincoln models sold in China are imported from North America. In 2017, the brand sold 54,124 vehicles in the country, marking 66% rise from the prior year, which majorly consisted of upper-end Lincolns — Lincoln Continental sedan and Lincoln MKX crossover SUV.

Price Performance

Year to date, Ford’s stocks have underperformed the industry it belongs to. During the period, the company’s stock has lost 14.9% compared with the industry’s decline of 11.1%.

Zacks Rank & Stocks to Consider

Currently, Ford carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the auto space are Autoliv, Inc. (ALV - Free Report) , American Axle and Manufacturing Holdings, Inc. (AXL - Free Report) and CarMax, Inc. (KMX - Free Report) . Autoliv sports a Zacks Rank #1(Strong Buy) while American Axle and CarMax carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Autoliv has an expected long-term growth rate of 12.7%. The company’s stock has seen the Zacks Consensus Estimate for annual earnings being revised 14.4% upward over the past 30 days.

American Axle has an expected long-term growth rate of 8.1%. The company’s stock has seen the Zacks Consensus Estimate for annual earnings being revised 1.3% upward over the past 60 days.

CarMax has an expected long-term growth rate of 14.8%. The company’s stock has seen the Zacks Consensus Estimate for annual earnings being revised 3% upward over the past 30 days.

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