Once again, Ford (NYSE:F) is springing an unexpected charge that will hurt investors. It is little wonder that the stock remains undervalued at 7 times forward earnings. The dividend yielding over 6.5% is the only thing stopping the stock from falling further. So, what happened?
Ford will record a $2.2-billion loss related to its pension, according to the disclosure in the Securities and Exchange Commission filing. Q4 net income will fall to around $1.7 billion. Still, this re-measurement loss is a special item and will not have any impact on adjusted EBIT or adjusted earnings per share.
Ford is taking care of its staff;s needs by recognizing that staff members live longer.
The workers also have higher medical costs due to inflation. Plus, the cost of living adjustment raises the costs for Ford.
On the balance sheet, the $2.2-billion charge is entirely non-cash. And since Ford does not need to increase pension contributions, the company will have the same resources as it did before. Operationally, expenses related to ramping up the Mach-E launch and rolling out new 2020 vehicle models are covered.
Valuation
Ford’s dividend is currently safe. And relative to its competitors, the stock still has upside, provided that the company’s high-end models resonate with customers. A multiple valuation on revenue suggests that the stock is worth well over $10 a share. On Stock Rover, the site rates the stock as a 28/100 overall while assigning a strong score for dividends.
Disclosure: the author owns Ford stock.
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