Ford (F, Financial) has been a frustrating stock to hold for investors and the company’s recent earnings report didn’t provide any good news for investors either. Ford released its mixed quarterly earnings report last month. The Blue Oval posted an EPS of $0.23 which was lower than $0.26 that the analysts were expecting. On the revenue front, the company reported sales of $33.92 billion, which were in line with the analysts’ estimates. This contrasts with $0.25 EPS on revenue of $33.9 billion last year. With the stock being range bound for the last two years, and a disappointing quarter, is it time to bail on Ford? Let's take a look.
F-series in the U.S.
Ford's F-series truck represents a gigantic part of the organization's general revenue. Hence, it isn’t a surprise that Ford missed the estimates on earnings. The company has been struggling with production issues of the F-150 trucks and While the sales of the F-series trucks dropped 1.3% in 2014, the truck will compensate for the misfortune soon.
The F-150 is not falling due to the better performance of the opponents. Sales are down due to supplies of Ford's trucks have been restricted at its two truck manufacturing plants because of the convoluted changeovers needed to create the new 2015 F-150.
Since the 2015 F-150 had aluminum body boards, Ford needed to close down its two noteworthy industrial facilities to make the changeovers. Thus, the decline in sales wasn't a consequence of Ford's inadequacy but supply limitations. The changeover at Ford's Rouge industrial facility was finished in 2014 while the other processing plant is relied upon to be changed over in the nearing months. I'm almost certain that, once the move is finished, Ford will make back any lost market share. In the course of the last telephone call, Ford's CEO Mark Fields said that the organization is seeing exceptionally solid interest for the 2015 F-150, and the organization could witness best January sales since 2004.
Growing in China
In the wake of posting twofold digit sales development in China in each of the initial seven months of 2014, Ford's sales development reduced to 9% in August, and sales declined marginally in September and October. The sudden logjam came as Ford confronted more troublesome year-over-year sales correlations. Besides, Ford was at that point utilizing every last bit of its generation limit in China.
As it were, the sales lull can be ascribed to Ford's uncommon accomplishment in China. In 2012, Ford revealed an aggressive arrangement to twofold its creation limit (and sales) in China by 2015. On the other hand, amid 2013 and 2014, interest for Ford vehicles rose considerably speedier than generation limit.
Luckily, Ford's creation bottlenecks in China are facilitating. In November, Ford opened a third gathering plant in its principle Chinese creation center of Chongqing. This extended generation limit by 360,000 vehicles per year. The new Chongqing plant will fabricate the as of late propelled Ford Escort. The Escort is a significant bit of Ford's arrangements to pick up market share in China not long from now.
Conclusion
Ford is definitely undervalued and despite the bad earnings report, the company has more upside to odder. The stock has astoundingly remained range bound in the last few months; however I think it has the potential to reach $20 mark. Investors should buy Ford despite the bad earnings report.
