Ford has fallen 10% prior to now month. Is it time to purchase forward of its earnings report?

Ford (NYSE:F) has dropped together with a lot of the remainder of the auto sector prior to now month, main as much as the discharge of the corporate’s quarterly earnings report subsequent week. Is now the time to purchase?

Ford Warns as a Recession Looms

Shares of the Huge Auto bellwether have been hit laborious in current weeks, thanks partly to an earnings warning issued in late September. Ford inventory has dropped 10% over the previous 30 days whereas the S&P 500 has retreated solely 5%. As compared, rival Normal Motors (GM) has fallen 14%, whereas Honda shares (HMC) have slid 11%, Toyota (TM) 5% and Stellantis (STLA) 3%, as of Oct. 20.

Ford is slated to launch its Q3 earnings report on Oct. 26.

The automaker’s inventory had seen declines earlier within the 12 months however started to recuperate in July. That restoration ended on Sept. 19, nevertheless, when Ford issued a shock revenue warning for Q3, which it attributed to escalating prices and a scarcity of auto elements. Regardless of the setback, Ford maintained its full-year working revenue steerage.

Traders punished Ford the subsequent day, pushing shares down 12% to shut at $13.09. The inventory hasn’t traded above $13 since Sept. 22.

Ford shares had been rained on once more on Oct. 10 when UBS issued a notice downgrading the automaker to Promote, citing issues concerning the firm’s skill to climate a recession.

“Ford ranks behind Stellantis and GM by way of North American EBIT margins and in gentle of the seemingly recession, has the best threat of testing break-even factors,” wrote UBS analysts of their notice. “In a nutshell, Ford has one of many least enticing threat/reward profiles amongst Western OEMs on a 12-month view, which is why we downgrade to Promote.”

Is F a Purchase?

Most Wall Avenue analysts are extra upbeat. Of the 23 analysts tracked by SA, 10 had a Purchase ranking, 10 a Maintain and three a Promote This equates to a mean ranking of Maintain.

Quantitative measures level to a extra bullish outlook. In search of Alpha’s Quant Scores system views the inventory as a Robust Purchase. The automaker scores an A+ for profitability, A- for progress, B+ for revisions, B for valuation and a C+ for momentum.

SA contributing analysts, in the meantime, have a Purchase ranking on the inventory, on common.

In an instance of this upbeat disposition, Low cost Fountain mentioned in an evaluation on Oct. 7 that they had been bullish long-term on Ford as a consequence of “sturdy gross sales progress throughout key fashions” and its “respectable” money place.

“Whereas the inventory would possibly come underneath stress within the brief to medium-term because of macroeconomic headwinds, the corporate’s money place stays sturdy and the inventory seems to commerce at a lovely worth on an EV/EBITDA foundation,” Low cost Fountain mentioned. “Ought to we see gross sales progress rebound heading into 2023, then this might be a big catalyst for upside.”

Nonetheless, fellow SA contributor The Asian Investor suggested a extra wait-and-see method. In an Oct. 9 evaluation, the analyst mentioned buyers ought to maintain off on shopping for Ford till the corporate releases its Q3 earnings report on Oct. 26, citing concern that current worth hikes on autos such because the F-150 Lightning pick-up might dampen buyer demand.

“With wait instances additionally prone to improve as a consequence of an ill-calibrated provide chain, I see rising dangers for Ford’s FY 2023 steerage which I consider will under-perform FY 2022 steerage,” The Asian Investor added.

In the meantime, SA contributor Juxtaposed Concepts wrote in an evaluation on Oct. 18 that Ford’s comparatively low-cost worth was an “glorious entry level” into the inventory, particularly given its dividend yield of 5.15%.

“This time of most ache has additionally created essentially the most opportune and contrarian time for bottom-fishing buyers, who’ve been ready to load up F at these near-bottom ranges,” Juxtaposed Concepts added.