Ford Is Down By 5%, Here Is Why

Key Insights

• Ford easily beat analyst estimates on both earnings and revenue. 
• The decrease of the value of Ford’s share in Rivian led to a loss on a GAAP basis. 
• After the pullback, Ford stock is trading at just 6 forward P/E. 

Ford Stock Falls Despite Strong Report

Shares of Ford  found themselves under pressure after the company released its first-quarter report. Ford reported revenue of $34.5 billion and adjusted earnings of $0.38 per share, beating analyst estimates on both earnings and revenue.

On a GAAP basis, the company recorded a net loss of $3.1 billion due to the mark-to-market loss of $5.4 billion on Ford’s stake in Rivian. Rivian stock has performed poorly after the initial hype, and it is currently trading at all-time lows.

For the full-year 2022, Ford maintained its outlook for $11.5 billion – $12.5 billion in adjusted EBIT. The company expects that semiconductor availability will improve in the second half of the year. At the same time, Ford notes that commodity costs would be up by about $4 billion year-over-year.

What’s Next For Ford Stock?

Analysts expect that Ford will report earnings of $1.93 per share in the current year and earnings of $2.23 per share in the next year, so the stock is trading at roughly 6 forward P/E. It should be noted that analyst estimates have been moving lower in recent weeks.

Ford stock lost momentum at the start of this year and is down by 45% from 2022 highs. Current valuation levels look attractive, so Ford stock may get support from speculative traders who are willing to bet that the recent sell-off is not justified.

The key risk for Ford shares is the potential slowdown of the world economy, which could reduce demand for the company’s products. The recent U.S. GDP Growth Rate report indicated that GDP declined by 1.4% in the first quarter, compared to analyst consensus which called for growth of 1.1%. In case the U.S. economy continues to slow down, Ford stock may find itself under more pressure.

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