Ford is expected to publish its Q2 2024 earnings soon, with projected revenues of $41 billion, a 3% decline compared to last year. Earnings are expected to be $0.62 per share, slightly above consensus estimates. Despite a 5% increase in its stock price year-to-date, Ford has lagged behind rival GM, which has gained close to 30% during the same period. Concerns about the automotive market include declining car prices and weakening consumer confidence in the U.S., which could impact sales in the near term.
Ford saw overall volumes for Q2 increase by 1% year-over-year, driven primarily by a 5% rise in truck sales. The flagship F-Series trucks saw a 30% sequential increase in sales, likely due to the production ramp-up of the new 2024 F-150 truck. The F-150 series remains Ford’s most profitable product line, with higher margins for trucks compared to other body styles. Despite the challenges in the automotive market, Ford’s strong performance in truck sales could potentially boost its average selling prices.
Ford’s stock has seen significant gains over the past few years, with a 45% increase from early 2021 to the current price of around $13. However, the stock’s performance has been inconsistent, with highs of 136% in 2021 and lows of -44% in 2022. In comparison, the S&P 500 has seen more stable returns over the same period. The Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed the S&P 500 each year, indicating better returns with less risk compared to the benchmark index.
Despite concerns about the broader automotive market and high interest rates, there are also positives for Ford. The company’s slow transition to EVs has been a headwind for the stock, but the cooling demand for EVs and the rise in hybrid vehicle sales could benefit Ford. The market for hybrid vehicles is expanding, with Ford’s hybrid sales rising 56% year-over-year in Q2. Ford’s stock is currently trading at an attractive valuation of 7x 2024 consensus earnings, with a valuation of $15 per share, 17% ahead of the current market price.
Overall, Ford’s Q2 earnings report will be closely watched to see how the company navigates the challenges in the automotive market and capitalizes on its strengths in truck sales and hybrid vehicles. With a mixed macroeconomic environment and high oil prices, it remains to be seen whether Ford can outperform the S&P 500 in the coming months or face similar underperformance as in 2022 and 2023. Investors are advised to closely monitor Ford’s performance and market trends to make informed investment decisions.
