Ford Motor Company (F, Financial) saw a modest decline of 0.67% in its stock price, reaching $9.68. This movement reflects ongoing challenges in the automotive industry, particularly for Ford.
Ford Motor Co (F, Financial) has been facing significant hurdles, notably in production and design quality, resulting in the company leading the U.S. industry in vehicle recalls. These recalls have substantially increased their warranty expenses, negatively impacting earnings. In the second quarter of 2024, Ford reported an operating profit of $2.8 billion, which was a 26% decrease from the previous year and fell short of Wall Street expectations of $3.7 billion. The increased warranty costs were a significant contributor to this decline, rising by $800 million from the first quarter, amounting to approximately $2 billion during the period.
The company's aggressive push towards electric vehicle (EV) development has also impacted its financial standing. Ford anticipates ending 2024 with a $5 billion loss in its electric vehicle division, Model-e. The challenges are intensified in the Chinese market, where new-energy vehicles dominate more than half the market, leading to fierce price competition. Ford is attempting to address these issues by enhancing quality and focusing on its EV lineup. However, a strategic reevaluation might be necessary, especially concerning its market position in China, to improve its overall performance.
From a valuation perspective, Ford's current price-to-earnings (P/E) ratio stands at 10.99, which is relatively low compared to the industry's median. The company's price-to-book (P/B) ratio of 0.87 is close to a three-year low, suggesting that the stock might be undervalued based on book value. Furthermore, the GF Value indicates that Ford is modestly undervalued, with a GF Value of 13.33. This valuation can be further explored via the GF Value page for Ford.
The dividend yield of 6.19% is close to a three-year high, offering attractive returns to income-focused investors. However, the Altman Z-score of 1.01 places Ford in the distress zone, implying a possibility of bankruptcy within the next two years. This financial caution is underscored by Ford's ongoing issuance of new debt, totaling $12.5 billion over the past three years.
Despite these challenges, Ford's Beneish M-Score of -2.31 indicates that the company is unlikely to be engaging in financial manipulation. As Ford navigates its current operational hurdles and financial landscape, stakeholders should keep an eye on its strategic decisions, especially in the emerging EV market and international territories like China.
