Why Ford Motor Company Is a Buy After Earnings

Last week was a tough one for Ford Motor Company (NYSE:F). The global semiconductor shortage and supply constraints took a toll on results in the fourth quarter, as earnings revealed on Thursday afternoon were weaker than expected. Fourth-quarter adjusted earnings dipped to 26 cents per share, down from $0.34 per share in the same quarter a year ago, while revenue came in at $37.7 billion. Analysts were expecting adjusted earnings of 45 cents per share on $35.52 billion in revenue.

Ford (F) logo on a steering wheel

Source: Proxima Studio / Shutterstock.com

For its fiscal year 2021, Ford achieved total revenue of $126.15 billion and adjusted earnings of $1.59 per share. That compares to revenue of $115.89 billion and adjusted earnings of 36 cents per share in fiscal year 2020. However, these results also fell short of expectations for earnings of $1.93 per share and revenue of $126.31 billion.

F shares fell more than 10% on Friday in the wake of its disappointing results. While they’ve continued to trek lower this week, I wouldn’t write Ford off just yet.

First, the company noted that it became the number-two seller of electric vehicles in the U.S. in 2021. A move that Ford’s CEO called an “important early step toward eventually being the true EV leader.” He reiterated that Ford’s EV production capacity would double to at least 600,000 vehicles by 2023 — and EVs are expected to account for at least 40% of all vehicle production by 2030.

I should add that the increased demand for the Bronco, Maverick, Mustang Mach-E and Bronco Sport helped boost Ford’s commercial-brand vehicle market share to 15% for full-year 2021. It also makes Ford the number-one automaker in the U.S.

Ford is also very optimistic about 2022, given strong demand for the Mustang Mach-E and F-150 Lightning, as well as the Bronco and Maverick pick-up truck. In fact, the increased demand for the Bronco, Maverick, Mustang Mach-E and Bronco Sport helped boost Ford’s commercial-brand vehicle market share to 15% for full-year 2021. It also makes Ford the number-one automaker in the U.S.

Profitability is also expected to improve in China next year. Lincoln volume in China outpaced Lincoln volume in the U.S. Full-year 2021 revenue rose almost 50% year-over-year (YOY), thanks to the release of the Lincoln Zephyr. In South America, the automaker’s reorganized, asset-light business segment is profitable and growing.

Overall, Ford is very optimistic about 2022. Full-year 2022 adjusted EBIT is expected to increase between 15% and 25% YOY, or $11.5 billion and $12.5 billion. Adjusted free cash flow is expected to come in between $5.5 billion and $6.5 billion.

My Portfolio Grader is pretty optimistic about Ford Motor, too, as it gives it an overall B-rating.

Image of Louis Navellier's Portfolio Grader grades for Ford stock.

As you can see in the Report Card above, Ford earns an A-rating for its Quantitative Grade. This tells me that institutional buying pressure is not letting up in the stock.

Now, yesterday Ford did warn that it would have to curtail production because of the semiconductor chip shortage. The conundrum is the company is going to curtail the Mach-E production a bit, which requires literally double the semiconductor chips of vehicles with engines. So, Ford needs to balance everything out.

And I believe Ford will. The fact of the matter is it has a lot of popular models, it is putting a good dent in EV sales, and it is doing well in Europe. Remember, Ford has been in business for more than a century, so I fully expect it to bounce back after the semiconductor chip issues are sorted out.

Given this, I believe the current weakness in Ford stock is a great opportunity to snap up the stock at a discount.

Q4 Earnings for Lyft and Uber Set to Release This Week

While we’re on the topic of cars, I should add that we’ll be hearing the latest earnings from ride-share companies, Lyft (NASDAQ:LYFT) and Uber (NYSE:UBER), this week. Lyft is up with its fourth-quarter earnings results this afternoon. Currently, analysts are calling for earnings per share (EPS) of 9 cents on revenue of $938.86 million. This is up from an EPS loss of 58 cents on $569.9 million in the same quarter a year ago.

Uber follows up with its fourth-quarter earnings report Wednesday afternoon. Analysts expect earnings to tighten from an earnings loss of 54 cents to an earnings loss of 35 cents per share. Revenue is forecast to rise 69.3% YOY to $5.36 billion.

Now, it’s been a tough year for both companies. Lyft and Uber have been contending with safety issues for their passengers and drivers. Lyft reported that, in the past three years, it recorded more than 4,000 sexual assaults. Uber noted it had recorded about 6,000 cases of sexual assault.

Lyft shares and Uber shares are down about 5% and 9%, respectively, year-to-date. They’re also down about 40% from their 52-week highs.

It’ll be interesting to see how the companies’ earnings reports stack up. Earnings estimates for Lyft have been upped 50% in the past three months. It also has a strong track record of posting earnings surprises. Analysts’ earnings estimates for Uber, however, have held relatively steady over the past two months and it has a mixed earnings surprise history.

Let me add that neither company rates very highly in Portfolio Grader. As you can see below, Lyft earns a C-rating for its Total Grade and Uber earns a D-rating for its Total Grade. Both companies also hold a D-rating for their Quantitative Grade, which tells me that they don’t hold much institutional interest.

The bottom line: Neither are buys heading into their fourth-quarter results.

Image of Louis Navellier's Portfolio Grader grades for Lyft stock and Uber stock.

As always, I’m curious to see how Wall Street responds to Lyft’s and Uber’s quarterly results. One big takeaway from the fourth-quarter earnings season so far is that earnings are working. In other words, companies that post strong earnings results and issue positive guidance are rewarded. Companies that announce weak results and poor future guidance are punished.

This holds true for my Growth Investor companies. My average Growth Investor stock is characterized by 33.4% annual sales growth and 45.6% annual earnings growth. I should add that the analyst community has revised their consensus earnings estimates 12.1% higher in the past three months. Ford, which I recommended to my Growth Investor subscribers in November 2021, is my first earnings miss. However, it is one of my top picks for the electric vehicle revolution (and one of my Top 5 Stocks for February), and it’s dedicated to staying at the forefront of vehicle evolution.

To learn more about my latest thoughts on earnings season, consider signing up for Growth Investor now. Once you do, I’ll send you my special reports, 3 Stocks Powering the $150 Trillion AI Revolution and 3 Plays for the $12 Billion Battery Opportunity — yours absolutely free.

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The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:

Ford Motor Company (F)


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