To call the year-to-date price action in Ford (NYSE:F) stock a “car wreck” might sound like an exaggeration. But watching the price nearly get cut in half since the beginning of the year has been heartbreaking. With the company’s earnings event scheduled for April 28, it’s awfully hard to have confidence as an investor.
Intrepid traders won’t be stopped from taking a chance on F stock, but the timing might not be ideal for a long position. On one hand, we should consider the current price a rare opportunity. But then, the share price could be this low for good reasons.
We also have to consider tthat the upcoming earnings release will address the first quarter of 2020. The novel coronavirus has had a tremendous impact on vehicle sales. It’s imperative that we assess the damage of this fiscal “car wreck” before considering a long position in F stock now.
Ford Reinvents Itself
The Ford of today is quite different from the company that your grandparents knew about. In 2018, Ford made a highly controversial announcement that it intended to phase out some of its most popular vehicle lines.
Specifically, Ford wanted to phase out the Taurus, Fusion and Fiesta vehicle brands. Plus the company planned to reduce the popular Focus line of vehicles to just the Focus Active.
At that time, President and CEO Jim Hackett claimed that Ford was “reinventing the American car.” Critics might have countered this by pointing out that the Taurus, Fusion, Fiesta and Focus were all very popular. Plus, those were among Ford’s most affordable automobile brands. Is there really any need to phase them out?
Moreover, Ford announced that around 90% of its North American automobile lineup would consist of SUV’s, trucks and crossovers by 2020. And here we are in 2020, a time when many people can’t afford big, bulky, pricey vehicles.
Ford couldn’t have predicted the advent of the pandemic. Still, this seems like the worst possible time to try to “reinvent” its product lineup. And yet, Ford is still staying the course with its phaseout of Focus and Taurus while continuing to double down on its SUV gambit with the reportedly forthcoming Bronco and Bronco Sport models.
To Avoid Disappointment, Expect Disappointment
This ill-timed shift away from economy cars has been in progress for a while and undoubtedly impacted Ford’s first-quarter earnings data. It’s so wrongheaded that even after the earnings release, owning F stock might not be a great idea.
To the company’s credit, Ford did at least warn investors ahead of time that the upcoming earnings report will indicate fiscal losses. In particular, Ford expects a quarterly net loss of $2 billion. The company also forecasts an adjusted pre-tax loss totaling $600 million.
In addition, Ford anticipates that the company’s quarterly revenues will amount to $34 billion. That would indicate a year-over-year decline of 16%. Moreover, projections suggest that wholesale shipments of vehicles during 2020’s first quarter declined by 21% compared to the same quarter of the previous year.
Plus, investors must factor in the auto-plant shutdowns. The United Auto Workers (UAW) union is still negotiating with Ford and other major automakers about possibly reopening auto-manufacturing plants. The UAW evidently wants the companies to allow workers who feel unwell to be able to quarantine themselves without loss of pay.
The UAW and the major automakers might work out a deal. But even if they do, that’s won’t impact the upcoming earnings data. It might affect how the market moves the F stock price, but if you’re counting on that, you’ll probably be disappointed.
Ford’s warning about fiscal losses should be enough to keep our expectations super-low. As long as we’re expecting a letdown, we might actually not be let down.
The Takeaway on F Stock
You might say that F stock is trading at a depressed price — and you wouldn’t be wrong about that. Still, an earnings letdown could make the price even more depressed. That’s an unsettling prospect. You’re probably better off just staying out of the fray and watching the pileup from a distance.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. As of this writing, he did not hold a position in any of the aforementioned securities.
