Automakers have had a banner year with many companies outperforming the broad market by a pretty wide margin. In particular, Ford (F) has been a very strong performer, benefiting from an improved car market, pent-up consumer demand, and strong earnings.
However, some recent news out of the automaker suggests that a bumpy ride could be in the company’s near future. In a recent report, Ford revealed that it was expecting a sluggish sales environment in its European and South American operations in 2014.
In fact, the company said it expects lower pretax profits in 2014 due to these foreign markets. The firm also said that North America will be less profitable in 2014, with operating margins slumping to between 8% and 9%, down from a previous expectation of ten percent.
Due to this, Ford was down over 7.5% on the news, while other automakers also tumbled. General Motors (GM) was down nearly 3% off of this report as well, while Tesla Motors (TSLA) was off over 3.2% too.
This revised outlook may leave Ford, and the other automakers, with a bit of a flat tire heading into 2014. For Ford, this might be especially true given that the stock has already had some trouble breaking out as of late, and with the poor 2014 prediction, many might stay away from the stock in the near term.
Add this in to concerns over CEO Alan Mulally leaving—possibly for Microsoft (MSFT)—and the short term doesn’t appear to be favorable for Ford at all.
Still, despite these negatives, there is some hope for Ford in the coming months. Total car sales are expected to be between 16 million and 17 million units for the U.S. in 2014, ahead of Ford estimates for 2013 which came in at 15.9 million, suggesting still strong car demand next year.
Ford is also expected to more than double its new car launches in 2014, putting out 23 cars compared to 11 this year. This flurry of new launches—coupled with reduced pricing to move old models out the door—may be part of the reason for the slump in profit predictions for 2014. These might pay off in the years ahead though, but obviously some patience will be needed in the short term.
But what do you think?
Is this a buying opportunity for investors seeking exposure to automakers? Or is Ford’s run over for now?
Let us know in the comments section below!
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