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TheStreet Open House

Why Ford (F) is Getting Crushed

NEW YORK (TheStreet) -- Disappointing 2014 projections sent Ford Motor Co (F) shares lower during Wednesday's session, losing 7.9% to $15.38 by late morning.

The automaker said it expects lower pretax profit next year between $7 billion and $8 billion, $500 million lower than an estimated $8.5 billion in the current year. Causing concern, its North America division will see operating margins in the range of 8% to 9%, lower than a previously expected 10%.

The Michigan-based business is slated to launch its most aggressive product schedule in its history, with 23 all-new or refreshed vehicles set to be released, double the 11 vehicle launches in 2013.

"In 2014, we are investing across the world to support next year's launches, but also to drive profitable growth beyond 2014 as we serve more customers in more markets and in more segments," said Ford's Executive Vice President Bob Shanks in a statement.

TheStreet Ratings team rates FORD MOTOR CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate FORD MOTOR CO (F) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 12.7%. Since the same quarter one year prior, revenues rose by 11.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, F's share price has jumped by 42.89%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, F should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Net operating cash flow has increased to $3,840.00 million or 12.05% when compared to the same quarter last year. Despite an increase in cash flow, FORD MOTOR CO's cash flow growth rate is still lower than the industry average growth rate of 30.71%.
  • FORD MOTOR CO's earnings per share declined by 24.4% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, FORD MOTOR CO reported lower earnings of $1.42 versus $5.01 in the prior year. This year, the market expects an improvement in earnings ($1.67 versus $1.42).
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Automobiles industry and the overall market, FORD MOTOR CO's return on equity significantly exceeds that of both the industry average and the S&P 500.

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