Ford (F, Financial) recently released its quarterly earnings, and despite the numbers being good, Ford’s stock fell as much as 4% last week. Ford declared EPS of $0.24, which was ahead of the analyst estimates of $0.19. The revenue of $34.9 billion also surpassed the estimates of $33.1 billion. Also, Ford's guidance was in accordance with what it had effectively given this year; 2014 pretax profit of $6 billion was repeated in the press release.
Don’t ignore the long-term potential
Despite Ford's huge potential, investors are finding it hard to look past 2014 and early 2015. That negative fleeting viewpoint has sent Ford's stock down about 10% in 2014 and more than 20% in the course of the most recent 12 months. The essential reason of the blunder is the forthright expenses of preparing for the aluminum F-150 that will be soon turning out. On the other hand, investors ought to still concentrate on the long haul eventual fate of the organization and disregard the fleeting hardships.
The upcoming F-150 will prove to be a game changer for Ford. As the New York Times reported:
“Perhaps no product is as important to whether Ford will hit that number as the F-150 pickup. It was long the best-selling vehicle in America, but Ford took the significant step of redesigning its flagship truck with an aluminum body to save weight and improve fuel economy. It will begin arriving at dealerships in December. The change required a lengthy shutdown of its truck plant in Dearborn, Mich., to retool, and the company is working with dealers and body shops to train them on the differences inherent in repairing aluminum.
"It is hard to overstate the importance of the F-150 to Ford's overall health. Perhaps more than any other brand, Ford relies on its iconic truck to drive sales volume and its bottom line," said Eric Ibara, senior analyst at Kelley Blue Book. "So while it may win a lot of awards and generate more than its fair share of media buzz, Ford placed a huge bet on its redesign, and the outcome of that bet may be unknown for a while."
In North America, home of the F-150, Ford's third-quarter revenue was down 6 percent and sales to dealers down 8 percent, which the company attributed largely to the plant's five-week shutdown during the quarter. Ford's overall operating cash flow was negative $700 million for the quarter, for the same reason.”
Apart from this, Ford’s recovery plan in Europe has taken a minor hit and the company is no longer on track to breakeven in Europe in 2015. This didn’t go down well with investors, however the company has been working on improving efficiency in production plants and cutting-costs, so this minor delay shouldn’t have any impact on the long-term goals in Europe.
Ford's late vehicle launches have all been real victories. The Fusion and Escape have an opportunity boost Ford’s sales in the U.s. that just its F-Series truck has done in the most recent decade: surpass 300,000 deals in a full year. Ford's Focus, which is nearing another outline, has been the world's top rated nameplate for two years, and the Fiesta was the world's smash hit subcompact nameplate a year ago.
Those vehicles aren't a stroke of luck and as Ford keeps on taking off new plans, investors ought to expect revenues and primary concern profits to surge all through the rest of this decade. Like the path in which Oklahoma City Thunder's unpleasant couple of years brought about high draft picks to secure Kevin Durant and different stars, this current year's agony for the organization will bring on a notable all-new F-150, which helps the dominant part of Ford's profits, and another Mustang. Both will keep on being the absolute entirety of Ford.
Conclusion
Although the hardships mentioned above may take a toll on Ford’s stock in 2014 and early 2015, long-term investors shouldn’t worry and use every drop in as an opportunity to buy more stock. With a P/E of 8 and juicy dividend yield, Ford’s valuation is ridiculously cheap and is a great buy.
