Is Ford Stock a Buy Despite Its Profit Warning?

Ford has delivered solid second quarter financials due to high demand for electric vehicles. The company recently disclosed that it is still navigating supply chain disruptions and other economic challenges. Inflation-related supplier costs are expected to affect its profit margins in the third quarter. Let's find out if this stock is still a good investment. Please read on.

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The Ford Motor Company designs, manufactures, markets, and sells a wide range of vehicles. The company's business segments are automotive, mobility and Ford Credit.

Despite continued supply, economic, and political headwinds, F delivered a solid second quarter. The company's total revenues came in at $40.19 billion, up 50.2% from a year ago, and its adjusted earnings per share grew 423.1% from a year ago. There was strong demand for the company's first generation electric vehicles.

America's first electric pickup truck for police was unveiled on July 28. Built Ford Tough ® power and performance is blended with the vehicle's high-tech electric platform and innovation with Ford Pro's real-time software and support.

The growth plan will be advanced by the company. In July, F added battery chemistries and secured contracts locking up 60 gigawatt hours of annual battery capacity.

F warned investors that it expects to incur an additional $1 billion in costs during the third quarter of fiscal 2022. More than 40,000 to 45,000 vehicles are affected by parts shortages due to supply chain constraints.

Over the past six months and year-to-date, the stock has declined in value.

There are some things that could affect F's performance in the months to come.

The financials are solid.

F's total revenues increased in the second quarter of the fiscal year. In the prior-year quarter, the company lost $22 million. The adjusted EBIT grew from the prior year.

The company had an adjusted net income of $2.75 billion, an increase of 439% over the previous year. Its adjusted earnings per share increased from a year ago. The adjusted free cash inflow was $3.60 billion, compared to the $5.10 billion in the previous year's quarter.

Some analyst estimates are mixed.

The F's revenues are expected to increase in the third quarter. The earnings per share estimate for the current quarter is expected to come in at $0.44 which is a decline of 14.1% from the previous year.

Revenue is expected to grow by 16.4% and 10.4% over the next two years. The company's earnings per share is expected to decline in the next fiscal year.

There is a discounted valuation.

F is trading at 6.01x, which is 49.7% lower than the industry average of 11.97x. The stock has a forward Price/Sales ratio of 0.24.

The forward Price/Book is lower than the industry average. Its forward Price/Cash Flow is much lower than the industry average.

There is mixed profitability.

F has a trailing-12-month margin that is higher than the industry average. The industry average is 5.86%. The stock has a trailing-12-month levered FCF margin of 9.19%.

The stock's EBIT margin is lower than the industry average. The industry averages are 6.91% and 5.05%, respectively. Its asset turnover ratio is lower than the industry average.

POWR ratings don't indicate enough upside.

A neutral rating equates to a C for F in the POWR Ratings system. The POWR Ratings are calculated using 118 different factors.

Each stock is evaluated based on eight different categories. F has a B grade for value. It received a C grade for quality, in line with its profitability metrics.

The stock has a D for stability. The stability grade is justified by the stock's 1.37beta.

The auto & vehicle manufacturers industry has a D-rated 64 stock industry.

We have given F grades for growth, sentiment, and momentum. You can get all F ratings here.

The bottom line.

The company's second quarter financials were driven by high demand for its first- generation electric vehicles. Parts shortages and other supply chain issues are still affecting the automaker. Ford said it would spend $1 billion in the third quarter due to supply chain issues and inflation.

We think it would be wise to wait for a better entry point in the stock given F's gloomy earnings growth estimates, mixed profitability, and low stability.

How does Ford stack up against its peers?

There are other stocks within the Auto & Vehicle Manufacturers industry with a rating of A that could be checked out.

F shares fell before the market opened. F has declined since the beginning of the year compared to the S&P 500's rise.

Her interest in the stock market led to her becoming a financial journalist. She looks to help retail investors understand the underlying factors before they make investment decisions.

There is more.

Is Ford stock a good buy even though it has a profit warning?