Many Ford Motor (NYSE:F) bulls can’t understand why the stock is down 10% year to date especially when you consider the bumper quarters this company has enjoyed. Last quarter the company reported net income of $1.9 billion or EPS before special items of $0.45. In the same quarter 12 months ago, the company posted net income of $833 million which again illustrates the earnings growth path the company is currently on.
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Better pricing and higher shipments were the main reasons for the huge growth in net income in the third quarter but the Ford stock still sold off more than 5% after earnings as it missed analysts expectations due to higher than expected taxes.
On the earnings call, the company stated that the slight earnings miss was the reason for the stock sell off but I think there is something more going on here. Why? Well in the second quarter of this year, the company announced $1.88 billion in net income or an adjusted EPS of $0.47 (see chart) which was a significant earnings beat but the stock still wasn’t able to rally on the news.
So the question remains – What does Ford have to do to get its stock back up to $20 a share? The company pays an attractive dividend of $0.15 a share which equates to a 4.29% yield. I may be a lone voice here but if Ford stock can’t rally now, what would happen if the US were to enter a recession and customer credit contracted? The US on average has a recession every 6 years. It has been 8 years since our last one which means we are due one any time soon. In any event, value investors are still staying away from Ford stock despite have a low price to earnings ratio and a high dividend. Here in my opinion are some reasons why…
Ford’s Track-record Doesn’t Inspire Confidence
Firstly we have to look at the Ford stock’s history to explain why value investors are not interested at present. Dividend investors will note the dividend was halted in 2006 and was re-initiated in 2012. This is the first reason why growth investors would be staying away despite the current high yield. Below are more of its important fundamental metrics over a 10 year period.
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