Blog Posts
Ford Credit: Strength Or Weakness?
Summary
Ford's stock has underperformed major indices and competitors.
Although Ford Credit has performed well, headwinds are brewing.
I continue to rate the company Sell.
On November 25, I rated Ford (F) Sell and indicated:
Ford is struggling, but as always, market participants have been slow to react. This, however, may be changing. The progression of sell-side analyst estimates paint a difficult future for the company and its investors. As Ford's competitors advance their autonomous driving technologies, while Ford scales back its ambitions, I expect future expectations for Ford to continuously be revised downward in the coming quarters, leading to lower stock prices.
Market participants caught up to the deteriorating fundamental picture quicker than even I expected:
Since the article was published, the stock has underperformed the S&P 500 index by more than 17%, and I believe this is just the beginning.
Recent Financial Results
Ford on January 24 announced earnings in line with expectations coupled with a top-line beat. Per usual, Ford generated the majority of its 2017 revenue and all of its pre-tax profits in North America. This market is disproportionately important to the company, as we already knew.
More interestingly, Ford Credit performed well in both 4Q17 and in 2017:
The above table from the company's investor letter shows that Ford Credit generated pre-tax profits of $610 million and $2.3 billion in 4Q17 and 2017, respectively, representing significant increases from previous periods.
