Ford stock dropped 23% due to disappointing Q2 results, but Pro division success may offset losses

From Nasdaq: 2024-08-09 09:30:00

Shares of Ford have dropped 23% in the past month due to disappointing Q2 results with net income falling over 5% to $1.8 billion. The automaker experienced a significant increase in warranty and vehicle recall expenses, reaching $2.3 billion in Q2 alone, which worried investors. In contrast, GM reported strong Q2 earnings.

Ford Pro’s commercial vehicle division stood out with a 15.1% operating margin in Q2, driven by strong demand for Super Duty trucks. The company plans to increase production capacity by 100,000 units in 2026. CEO Jim Farley highlighted Ford’s focus on software technology and services, aiming for $1 billion in software revenues next year.

However, Ford’s EV division, Ford Model e, suffered a $1.1 billion loss in Q2, impacting overall profitability. The company anticipates a full-year loss for the Model e unit between $5-$5.5 billion. Despite challenges in the EV segment, Ford Pro’s success is expected to offset some losses, though concerns remain regarding the company’s future path.

Financially, Ford ended Q2 with $27 billion in cash and $45 billion in liquidity, marked by improvements from the previous quarter. The company also raised its adjusted FCF projection for the year. Ford faces challenges in improving vehicle quality, reducing warranty costs, and turning around its EV business, indicating a tough road ahead.

Despite challenges, Ford’s valuation remains attractive with a forward sales multiple below industry average, earning it a Value Score of A. For new investors, a cautious approach may be wise while existing shareholders should consider holding on as the company navigates internal hurdles and works on strategic improvements. Ford currently holds a Zacks Rank #3 (Hold).



Read more at Nasdaq: Is Ford (F) Stock a Buy Now After Declining 23% in a Month?