Ford Stock: All You Need to Know Before Earnings (F)

While the first half of 2015 wasn’t a particularly fruitful one for shares of Ford Motor Company (F) — for understandable reasons — a late-August low seems to have served as something of a capitulation for Ford stock.

Ford Stock: All You Need to Know Before Earnings (F)It couldn’t have happened at a better time either, as in the meantime U.S. auto sales have perked up to record-breaking rates even though demand in other parts of the world has waned.

Throw in the fact that General Motors (GM) posted a nice earnings beat last week, and all of a sudden Ford’s earnings news due Tuesday morning could end up being quite catalytic.

Here’s what investors need to know in the meantime.

Ford Earnings Outlook

As of the latest look, Ford Motor Company is projected to earn 47 cents per share on revenue of $35.07 billion for its third fiscal quarter of 2015. Both compare favorably to the year-ago numbers of 24 cents per share of F stock and $32.8 billion, respectively.

While it’s an impressive earnings growth projection, it’s also not one with a lot of meaning — the year-ago profit levels were adversely impacted by some expensive yet smart investments in future growth.

A more meaningful yardstick to measure Ford’s third-quarter results might be General Motors Q3 numbers. Despite an ignition-switch problem that turned nothing less than nightmarish (and expensive) before it was all said and done, GM earned an operating profit of $1.50 per share, topping expectations of only $1.19.

Had it not been for adverse currency exchange rates, the company may have topped the year-ago revenue total of $39.3 billion. Even so, the top line of $38.8 billion was impressive.

3 Things for Owners of F Stock to Mull

While Ford is a multifaceted company with lots of moving parts, so to speak, three key factors stand out as issues that will ultimately do most of the driving for earnings now and in the foreseeable future.

In no certain order:

  • Overseas Demand: International demand has not been especially strong of late, though China had been something of a bright spot up until the middle of the year when the Shanghai Composite Index threw a wrench in China’s economic gears. Which in turn has forced Ford to go on the defensive (read: cutback) as well as on the offensive (read: capex) there. Meanwhile, Ford is still struggling in Europe, and South America is apt to be a problem for Ford again just like it was for General Motors last quarter. All told, sales in South America fell 31% for GM during Q3.
  • Trucks: One of the reasons Ford did so relatively poorly in the third quarter of 2014 and is poised to do so relatively well for Q3 of 2015 is the fact that a year earlier it was in the midst of refitting some of its production plants to make the new F-150 pickup truck … which required some temporary plant shutdowns. Now not only are those factories up and running again, the demand for that very F-150 truck has been outstanding. F-series sales were up 8% in the third quarter, while sales of the new Edge SUV and revamped version of the Explorer were up 26% and 29%, respectively. It matters, because truck sales can make or break the iconic automaker.

Bottom Line for Ford Stock

While the third quarter didn’t get started on the right foot for Ford, it finished on a high note as sales stayed strong despite speculation of extreme weakness.

Case in point: September’s U.S. auto sales grew by double-digits for Ford thanks to strong sales of trucks and SUVs … a category where Ford dominates.

Granted, F stock is up 50% since its late-August low (a dip spurred by ears regarding China) thanks to clearly strong auto sales in the United States during the meantime.

But between a solid report from GM and the fact that Ford stock is still only valued at a plausible forward price-to-earnings ratio of 8.1, this might be a risk worth taking in front of earnings … and after, if the numbers are even just decent.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

More From InvestorPlace

Article printed from InvestorPlace Media,

©2022 InvestorPlace Media, LLC