Unlike Tata Motors (NYSE: TTM), Ford (NYSE:F) once again disappointed its investors with more restructuring charges and a downbeat outlook.
Only its dividend will stop the stock from falling further. But if Ford stock keeps trending lower, investors may want to think of averaging down.
Betting that Lincoln and truck sales will lead the revenue rebound is reasonable. Investors just need better execution from management to get the company back on track.
Ford reported adjusted FCF of $0.2 billion, up 80% Y/Y. Its liquidity topped $35 billion while cash balance was $22 billion. Although EPS of $0.35 is $0.05 higher Y/Y, adjusted EBITDA margin of 4.8% needs improvement.
Ford shares are for investors betting the turnaround will succeed. In North America, a product renewal involves replacing 75% of its lineup. Europe and China need cost reductions but continue to bleed money.
Ford could exit those markets but would give room to competitors to enter, so instead it may afford the quarterly losses.
Although too early to price a premium on, but the autonomous vehicle endeavor has a milestone date of commercialization self-driving services by 2021.
Takeaway
Watch Ford’s free cash flow growth and cash balance growth. The company still faces high capital spending and warranty costs. Until this improves, performance will underwhelm investors.
At well-below the $9.50 level, Ford stock is inexpensive from a forward P/E level. Still, value investors may want to hold a small position here.
Disclosure: Author owns F shares.
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