Yahoo Finance Ford Motor Company (F) Stock Is Hemorrhaging
Wednesday marks the 62nd anniversary of the Ford Motor Co (NYSE: F) initial public offering in 1956, but investors are in no mood to celebrate after the company released disappointing guidance after the market closed Tuesday.
Ford stock traded more than 6 percent lower Wednesday after Ford's full-year 2017 and 2018 earnings guidance fell short of Wall Street expectations.
Ford said it expects to report 2017 adjusted earnings per share of $1.78 and 2018 EPS of $1.45 to $1.70. Analysts were expecting 2017 EPS of $1.83 and 2018 EPS of $1.62.
[See: Why Investors Love Legacy Companies.]
Ford also declared a 13-cent-per-share supplementary cash dividend to be paid in addition to its 15-cent-per-share quarterly dividend, but investors were more concerned with Ford's earnings projections.
Ford's ambitions and expensive electric and autonomous vehicle initiatives will likely continue to take a bite out of profits in coming years. Tuesday's guidance suggests that bite may be bigger than investors anticipated. Ford has said it plans to spend $11 billion over the next several years to attain its goal of having 40 electrified vehicles and 16 full battery electric vehicles on the market by 2022.
Ford's expectation that earnings will decline in 2018 was particularly disappointing after General Motors Co. ( GM) said on Tuesday that it expects earnings to be flat this year and above Wall Street consensus estimates. Auto investors are dealing with major uncertainties about a potential cyclical downturn in the auto market, the transition to electric and autonomous vehicles, and a new group of potential disruptors, led by Tesla ( TSLA).
That uncertainly has been reflected in the market valuations of the legacy automakers. Ford stock trades at a forward price-earnings ratio of 8.2, while GM's forward P/E is 7.4. At their current share prices, GM and Ford are two of the cheapest stocks in the Standard and Poor's 500 index in terms of earnings multiples.
Last month, Morgan Stanley analyst Adam Jonas said he is warming up to Ford, but the stock still faces near-term downside.
"We are hesitant to recommend the stock ahead of what we expect to be a significant capitulation of profits and restructuring actions that are needed to address over 10 percent of headcount, product and nameplate architecture and other items," Jonas said.
[See: Car Companies and the Race to Profits.]
Morgan Stanley has an "underweight" rating and $10 price target for Ford stock.
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