Ford Motor Co. (NYSE: F) is the second largest automaker in the United States behind General Motors Inc. (NYSE: GM). The business has started to experience recovery as inventories improved from easing supply chain issues in 2024, but the stock continued to underperform, trading down 16%. It's been an underperforming stock for over a decade, generating only a 10% return during that time compared to the S&P 500 index, generating 250% cumulative gains. The auto/tires/truck sector giant also had 62 recalls in 2024, double the number of recalls from GM.
Despite $1.5 Billion in Losses, Ford Strongly Backs Its EV Strategy
Its pivot into the electric vehicle (EV) market has been a cash-burning money pit as Tesla Inc. (NASDAQ: TSLA) and even Rivian Motor Inc. (NASDAQ: RIVN) continue to outperform it. Ford should be a benefactor of Trump’s proposal to levy tariffs up to 25% on imports. Despite the projected $1.5 billion in annual losses in its EV segment, the company is standing firm behind its EV strategy.
Ford CEO Jim Farley was adamant that their EV strategy is intact, "Since Q1 of last year, EV volumes have grown 35%, while revenues in total are flat at $14 billion. That means prices have fully offset the progress on volume. We're expecting roughly 150 new EV nameplates to hit North America by the end of 2026. And some of our competitors are already resorting to very aggressive lease tactics even on the brand-new products, which creates huge residual risk and overhang and brand damage."
Solid Third-Quarter Gains and Booming Ford Pro Business
Ford posted Q3 2024 EPS of 49 cents to beat consensus analyst estimates of 46 cents by 3 cents. Revenues rose 5.5% year-over-year (YoY) to $46.2 billion, beating $45.13 billion consensus estimates. North America's volume grew 8% YoY, driven by its newly launched trucks and SUVs, helping grow Ford's United States market share by 40 bps to 12.6%. Global hybrid vehicle sales rose 30% YoY as its hybrid mix is on pace to reach 9% in 2024.
Ford Pro commercial motor and EV vehicles and service revenues rose 13% YoY to $15.7 billion, generating EBIT of $1.8 billion with a margin of 11.6%. Ford Pro Intelligence is the software platform powering Ford Pro's digital services. Its paid software subscriptions rose 30% YoY to around 630,000 users.
Ford Model E, its EV segment, reported an earnings before interest and taxes (EBIT) loss of $1.2 billion. The YoY cost improvements of $500 million were offset by industrywide pricing pressure. The segment continues to improve its profit trajectory, reaching $1 billion in cost improvements in 2024.
The Outlook for 2024
Ford expects adjusted EBIT of $10 billion for 2024, down from its outlook of $10 billion to $12 billion, with adjusted free cash flow between $7.5 billion and $8.5 billion. Capital expenditures (CapEx) are expected to be between $8 billion and $8.5 billion, down from $8 billion to $9 billion. Full-year EBIT for Ford Pro is expected to be around $9 billion, Ford Blue for around $5 billion, and Model e a full-year loss of about $5 billion. EBIT from Ford Credit is expected to be around $1.6 billion.
F Stock Forms a Descending Triangle Pattern
A descending triangle is normally a bearish chart pattern indicator of lower highs on the bounce against flat bottom support. The descending upper trendline converges with the flat-bottom horizontal lower trendline support at the apex point. A breakdown triggers if the stock falls below the lower trendline support. A breakout triggers if the stock surges above the upper trendline resistance.
F stock formed its descending upper trendline resistance at the $14.79 Fib, converging with the flat-bottom lower trendline support at the $9.52 Fib. The channel is getting smaller as it nears the apex point. The daily anchored VWAP resistance is slowly falling at $10.55. The daily RSI is chopping at the 35-band. Fibonacci (Fib) pullback support levels are at $9.53, $8.89, $8.43, and $7.74.
F stock’s average consensus price target is $11.83, implying a 22.5% upside and its highest analyst price target sits at $18.00. It has three analysts' Buy ratings, seven Hold, and four Sell Ratings. The stock has a 2.85% short interest.
Actionable Options Strategies: Bullish investors can consider using cash-secured puts at the Fib pullback support levels to buy the dip. If assigned the shares, then writing covered call at upside Fib levels executes a wheel strategy for income on top of its hefty 6.21% dividend yield.
