Ford Motor Company (NYSE:F) is one of the great American companies and has rebounded quite nicely since the auto industry bailout. But Ford stock has been stuck in the mud for years.
Five years ago, Ford stock was trading around $12. F currently trades at … $12. That’s right — Ford hasn’t budged in half a decade.
Sure, there have been plenty of fits and starts along the way — F touched $17 multiple times in 2013 and 2014, and dipped as low as $9 in 2012. But it’s down 22% in the last two years, with no real signs of life.
Ford Stock Spinning Its Wheels
Value investors will argue that Ford sets up well for a grand comeback, citing the stock’s 11 trailing price-to-earnings ratio and 7.4 forward P/E. But Ford has been technically undervalued for a long time — its P/E hasn’t exceeded 11 since 2015. The low valuation hasn’t been enough to lure investors.
The problem is, Ford hasn’t been growing sales the way its chief competitors General Motors Company (NYSE:GM), Honda Motor Co Ltd (ADR) (NYSE:HMC) and Toyota Motor Corp (ADR) (NYSE:TM) have been. Those companies’ sales improved by an average of 122% last quarter; Ford’s declined 4%. Meanwhile, Ford’s earnings declined 37% last year, while General Motors’ and Toyota’s grew. So it’s no surprise shares of GM (+19%), HMC (+10%) and TM (+4%) have all risen in the last year, while F has declined 7%.
Analysts aren’t expecting a big turnaround in Ford’s top and bottom lines anytime soon — earnings are estimated to decline again this year, while sales are projected to remain flat in 2017 and 2018. So, where’s the growth in Ford stock going to come from? A low valuation hasn’t been enough to entice bargain-shopping investors for more than a year now. Why is that suddenly going to change?
Mind you, 2016 was a record-setting sales year in the U.S. for most auto makers. Fueled by low gas prices, low interest rates and rising employment numbers, U.S. consumers bought 17.55 million cars and trucks last year, up from 17.47 million in 2015. Nissan Motor Co Ltd (ADR) (OTCMKTS:NSANY) and Subaru were actually the fastest growers at 5% and 6%, respectively. Honda’s sales improved 3%, Hyundai’s 2%. Ford’s only grew 1%, ahead of only Fiat Chrysler Automobiles NV (NYSE:FCAU) (flat) and General Motors (-1.3%).
With gas prices and interest rates on the rise this year, and President Donald Trump threatening to impose 35% tariffs on cars imported from Mexico (and calling out Ford by name on Twitter), U.S. auto sales are expected to decline to 17.1 million this year. So the climate for auto makers, at least in the all-important U.S. market, is getting worse, not better.
It makes you wonder if Ford already missed its window.
F Stock Technicals Not Encouraging
From a technical standpoint, Ford stock has been holding steady at its 50-day moving average for more than a month, but that average has barely budged since January. Its 200-day moving has actually been on a slight downslope since the start of the year. Those don’t scream breakout.
If Ford beats its downbeat (-1% sales growth) first-quarter earnings next month, perhaps that will spark a short-term break to the high side.
Until then, however, I expect F stock to continue spinning its wheels.
As of this writing, Chris Fraley did not hold a position in any of the aforementioned securities.