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Bear of the Day: Ford Motor (F)

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Ford Motor (F - Free Report) is a popular auto company that produces cars and trucks. The company also engages in manufacturing automotive components and systems and financing and renting vehicles and equipment. The stock is the Bear of the Day after being downgraded to a Zacks Rank #5 (Strong Sell) after poor earnings results last week.

Ford has a market cap of $50 Billion and a dividend of 4.74%. The stock sports pretty good Zacks Style Score, with an “A” in Value “B” in Growth and “B” in Momentum. However, after a big miss on EPS these scores might be coming down as ‘peak auto’ maybe be upon us.

Q2 results

The company reported Q2 EPS on the 28th, with EPS seen at $0.52 versus the $0.60 expected. Revenue came in slightly better than expected, but the company cut their fiscal year 2016 industry outlook from 17.5-18.5 million units to 17.4-17.9 million units. They also narrowed their 2016 Industry volume to 90-92 million from 88-92 million.

Year over year sales were flat to lower in the Americas, slightly higher in Asia and up 15% in Europe. CEO William Clay Ford was upbeat and had some comments on the quarter: “We delivered another strong quarter one of our best second quarters ever and record pre-tax profits for the first half of this year. We remain committed to delivering another full year of strong profitability, even as we address some new risks and market challenges around the world.

Investors weren’t as upbeat as the stock fell from $14 to $12.50 premarket, a move of over 10%. The concern is that car sales have peaked and that automakers are running out of incentives to keep the sales going.

Estimate Revisions

Current and next quarters estimates have been coming down over the last 90 days. With September’s estimates falling 12.2% and December’s falling 4.7%. Analyst are in 100% agreement on lowering estimates with two analysts lowering the upcoming quarter over the last 30 days. While the long-term picture looks doesn’t look disastrous, analysts will have to adjust these numbers if a negative trend begins.

A Better Option

Commercial Vehicle Group (CVGI - Free Report) is a Zacks Rank #1 (Strong Buy) that supplies interior systems, vision safety solutions and other cab-related products for the global commercial vehicle market, including the heavy-duty (Class 8) truck market, the construction market and other specialized transportation markets. The company's products include suspension seat systems, interior trim systems, such as instrument and door panels, headliners, cabinetry and floor systems, mirrors, wiper systems, controls and switches specifically designed for applications in commercial vehicle cabs.

The company has a market cap of 126 Million and a Forward PE of 27. The stock sports Zacks Style Scores of “A” in Value, Growth, and Momentum. Over the last 90 days, estimates for fiscal year 2016 and 2017 have been revised higher. For 2016, estimates have flipped from -$0.16 to $0.15 and for 2017 they have also reversed, from -$0.16 to $0.15. The company reports on August 4th and investors are looking for a big move after the stock has rallied over 100% since their last beat in May.

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