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Evaluating Ford (F) Stock Near 10-Year Low

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Ford (F - Free Report) shares have slowly plummeted over the last five years as the American automotive giant and some of its peers face increased competition and shifting consumer habits. Now, Trump’s tariffs are dragging down Ford’s profits as its stock price inches near a 10-year low.


Ford CEO Jim Hackett has talked a lot about the need for the company to cut costs over the last year and focus only on what works. These efforts led Ford to announce its commitment to stop selling Ford brand sedans in North America by 2022 as the demand for SUVs, pickups, and crossovers continues to surge.

Ford announced in the spring that its Fiesta, Fusion, Taurus, and non-hatch Focuses are no longer part of its plans going forward. “We’re going to feed the healthy parts of our business and deal decisively with the areas that destroy value,” Hackett said on a conference call earlier this year. “We’re starting to understand what we need to do and making clear decisions there.”

The Detroit-based automaker’s Q2 profits sunk by nearly 50%. Worst still, Ford lowered its 2018 earnings projection and faces a slowdown in China—down 32% in July alone.

The silver lining here is that the second-largest automaker in the U.S. also announced its plans to cut $25.5 billion in costs by 2022, which marked a massive increase from its previous $14 billion goal. Plus, Ford expects to boost its electric vehicle investment to $11 billion by 2022 in order to offer a lineup of 40 hybrid and fully electric vehicles by that time. Ford’s electric and hybrid vehicle push should help the company compete with the likes of Volkswagen (VLKAY - Free Report) , General Motors (GM - Free Report) , Toyota (TM - Free Report) , Tesla (TSLA - Free Report) , and others in the EV race.

But investors might be nervous to hear that the firm’s bottom line has been hit by Trump’s tariffs on steel and aluminum. “From Ford’s perspective the metals tariffs took about $1 billion in profit from us,” Hackett said at a Bloomberg conference Wednesday. “The irony of which is we source most of that in the U.S. today anyway. If it goes on any longer, it will do more damage.”

Stock Price Movement & Valuation

Shares of Ford are down roughly 50% over the last 25 years, which falls well behind its industry’s average gains of 115%. This entire stretch has not been bad, but as a whole, Ford stock has been pretty brutal for some time now.

Ford stock is also technically up over 130% during the last decade, but most of that positive movement came in early 2009. The company has seen its shares sink over 45% in the last five years. And investors will see that Ford stock is closing in on its lowest point since the end of 2009.



Ford is currently trading at 6.7X forward 12-month Zacks Consensus EPS estimates, which represents a discount compared to its industry’s 10.8X average and the S&P’s 17.4X. But with its stock price tanking and its earnings outlook falling, it’s not really a true valuation play.



Looking ahead, our current Zacks Consensus Estimate is calling for Ford’s Q3 revenues to pop by 2.5% to reach $34.49 billion. Meanwhile, its full-year revenues are projected to slip by roughly 1.5% to $146.35 billion.

At the other end of the income statement, Ford’s adjusted quarterly earnings are projected to plummet 23.26% to touch $0.33 per share, while its full-year earnings are expected to fall 22.47%. 

Bottom Line

Ford is currently a Zacks Rank #5 (Strong Sell) based on its negative earnings picture. Therefore, it might be a stock that investors stay away from until Ford proves its long-term goals help turn things around.

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