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Subscriber Question: FORD Earnings Fallout Is The Stock A Buy, Sell or Avoid?

July 28, 2019


welcome back financial investors my name
is Brent and today we’re gonna be
answering a viewer subscriber question I
was asked over on the Facebook groups
the FI stock market investing will
recover stocks value investing growth
investing overall and this individual
hadn’t asked a question about Ford
Brent what do you think about forward in
the short and long term so that is what
we’re going to be taking a look at today
Ford earnings we’re gonna look at them
on the graphs we’re gonna look at their
balance sheets how much debt they have
how many assets they have earnings per
share return on invested capital go over
quite a bit of it and show why I
personally do not invest it forward and
we’ll also look at their dividend
information here as well so if you are
brand new to the channel have not yet
subscribe hit that subscribe button
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and real estate if you’re interested in
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interested in those and let’s dive into
for now there was a discussion earlier
today where Ford popped up on a bunch of
watchlist
there’s investors that have been holding
forward since the sever there’s a lot of
investors that have recently started
buying into Ford now I’m going to be
taking a quick look starting off with
their earnings whisper or an earnings
whisper kind of reading over what they
just reported here recently now
this is showing here on June 2019
burnings so maybe this isn’t the most
current one but we’ll go ahead and kind
of cover this one and then move from
here so Ford report a second quarter
June
the earnings of 32 cents per share on
revenue of thirty eight point nine
billion d consensus earnings estimate
was to 30 cents per share on revenue
thirty four point nine so they beat
earnings they beat revenue the earnings
whisper they were expecting was thirty
seven cents per share revenue fell point
two percent versus a quarter the same
quarter one year ago now forward this is
what caused them to kind of sell-off
either recently or in the past probably
right now so they expect twenty nineteen
earnings right now of one twenty the 135
where they were earlier expecting 137
per share so they actually dropped their
guidance they dropped their estimates
and that caused forward to sell-off now
this information this is showing
negative thirteen point five percent
maybe this is over last year their
consensus currently was thirty cents
they beated at thirty two so they did
beat their current estimates this is
actually showing year-over-year growth
of eighteen point five here’s that your
year-over-year revenue growth of
negative point two so the revenue
reported higher up eleven point three
and the revenue growth year over year
was down 0.2 percent so just a quick
summary of their earnings you could have
pause it and taking a look more there’s
not a lot more information down here now
jumping over into you know the graphs
here and taking a look here at their
price I’m gonna be comparing forward to
General Electric and I’ll show you here
why I am not an investor in forward
myself but I can see why other investors
would look at forward and think it’s a
great value or you know and such I’m not
gonna tell investors not to buy anything
or buy anything I just provide what I am
bind why I’m buying it why I would not
buy specific stocks and then leave it up
to the ambassador to make the decision
for themselves that whether they should
buy it or not in continue to hold now
Ford here one year period we’re at 956
right now we can see one year ago that
is exactly where a Ford was that now we
were in some tough times a year ago and
we fell with Ford all the way down to
below eight dollars on January 24 2019
those the double bounce right here
creating that W pattern and then Ford
shot up with the rest of the market now
if we look at the short-term three-month
here Ford recently draw from
over $10 per share now to 9:56 if we
bring in the 200-day and 50 day moving
average here and we go ahead and show
this over the year period
we’ll see that Ford just broke below the
50-day moving average but it could
continue falling even lower until it
gets some support down in that 208 point
at 922 but if we look at it for the year
removing both the 250 day bringing in
our yield we can see that our average
yield if we go ahead say imagine a line
right here in the center where the yield
and the price crosses and creates an X
so if you carry this all the way around
the price where the yield may I would
consider you know an opportunity or so
would be around eight dollars and
eighty-eight dollars and ninety cents
you would be getting started yield right
around six point five percent and that
would actually not have been even high
you can see back in December 29 18 the
starting yield was at over 7.5% with a
shared price of below eight dollars for
Ford now this could look like an
exciting purchase right now at 956 but
again this stock can probably fall all
the way until 88 dollars and eighty
cents we’re ambassadors who are looking
for some value who then may consider
buying into it but I you know I’m gonna
go ahead and continue showing you a
little bit more so now we’re gonna flip
over to the revenue and the income in
free cash flow now taking a look here at
revenue net income and free cash flow
these are all three financials that I
like to use when I’m looking into any
company here we can see that for the
most part they trend sideways with a
little bit of appreciation there I’m
gonna go ahead and bring in General
Electric now this is Turner Electric we
can see opposite lines here revenue
going down the income free cash flow
going down over a ten-year period now if
we go ahead and bring in our percentages
here we can see that Ford it’s still
positive over the past ten years but if
you break each of these up divided by
ten you’re gonna see here that the
revenue on average is four point three
percent their net income is one point
three percent and their free cash flow
is at 0.8 percent on average per year
now general Exchequer Force they had
some big warning signs ten years over
this period their revenue was down over
the past ten years their net income in
free
we’ll work down so that Ford’s not like
that right now but could it be in the
future so we shall see how that kind of
plays out now getting rid of those going
back to our normal data we’re gonna go
ahead and take a look at free cash for
the common share payout now this wasn’t
a bad one there actual common stock pal
is actually fairly small comparison to
their free cash flow they pay out
seventy five million dollars their
shareholders and common stock they have
a free cash flow of 7.4 one billion so
that is the you know if they had to
cover it with free cash flow they could
probably cover it or you know could be
considered covered that way price the
book and price earnings and price the
sales all brought in here so price the
book here at any one point oh four so
basically one it’s getting the price
you’re getting prices hills for one for
one value they’re for the price the book
book value is one and their price of
sales down at eight point two four and
their current p/e is it a twelve point G
for you can see here that they’re PE has
been growing why their price hasn’t been
growing their price has been declining
it’s their earnings that has been
declining and when you do the p/e ratio
a growing price earnings ratio means
that their earnings is going down and
their price is basically staying
stagnant so we’ll take a look at that
here also in just a minute now return on
invested capital Ford has a return on
invested capital of one point six one
percent now kind of comparing this to GE
GE obviously this one fell off a brick
at negative ten point oh wait currently
and what is another good value
opportunity I can’t think of anything at
the moment but still Ford where has this
been heading on a year-by-year basis if
you’re looking at this is trailing
twelve months each period each year
where are their return heading right now
it is going down that we haven’t seen
any recovery on return on invested
capital if we brought in you know Apple
for example that’s the only one I can
think of right now and take a look at
the return on invested capital
it’s it’s declining their iPhone sales
have obviously been dropping off a brick
but they’re still showing a twenty four
point eight three percent return on
invested capital and I held a lot of
stocks I mainly focus on to have an
eight to ten percent or more return on
invested capital so look for either a
growing return on invested capital or at
least have a starting return on invested
capital of at ten percent or more now
we’re gonna look at assets and
liabilities now assets and liabilities
here for Ford we have almost a one for
one so assets at two hundred and fifty
six billion and liabilities two hundred
and twenty billion now these numbers are
everything here that I’m showing you are
correct
I actually went over to the Yahoo
Finance went over to their financials
took a look here at their balance sheet
and took a look at their assets
currently reported for 2018 so twenty
eighteen to 56 55 for 256 540 billion so
basically two hundred fifty six billion
dollars of assets in here their debt we
come down here two hundred and twenty
four seventy four two hundred and twenty
five seventy four so basically those
numbers are all matching so here we’re
basically getting a one-for-one value so
you’re getting a two hundred fifty six
billion dollars of assets but you’re
also getting two hundred and twenty
billion dollars of debt or liabilities
now kind of dropping down here I want to
go ahead and show you their earnings
trailing twelve months that’s the one I
kind of wash out here over the past ten
years again we’re looking at earnings on
a year-by-year basis where you know even
though they’re cynical you can see they
have really good periods where they make
a profit they have some profits here in
the mid year where a lot of them you
know march through August I would say
you know summertime springtime they have
a lot of big sales in these automotive
industries you can see every year they
had these big gaps where they make a lot
of their sales well overall where is
this graph going are their earnings
growing or is it falling now GE well
this had a big comparison as well we
knew as of twenty
fifteen that General Electric was not
bringing in earnings today it was on the
decline year after year they were losing
they had a bit of a spike here 2016 and
2017 and just could not hold it they
just kind of continued sell-off now Ford
again earnings year-over-year they have
their big ol cycle where they’re nice
and the raise in their earnings but
overall they’re guiding lower a year
after year after year we can see
earnings currently is in the orange and
next year is in the blue this current
year is at $1 in 38 cents per share for
their earnings estimate but in next year
they’re getting lower at one dollar and
28 cents per share for their estimates
here
so again general electric here earnings
currently at least generally she’s
trying to turn it around so always look
at where they’re guiding into the future
what’s projected into the future if you
look at see normally you know just kind
of I think this is estimates you know
it’s estimated they take the average
that the company has been moving here
and then they kind of decrease it on
average you know where does it go on
average per year okay they decrease by
what ten percent or so every year so
they kind of just estimated that now
operating income and their expenses so
how much income do they bring in how
much do they spend operating income I
guess we could bring it in for the ten
year here and if we have percentages up
yeah we do oh no no we don’t okay so
operating income they make one point to
eight billion dollars and their capital
expenditures is one point six three
billion so do they bring in more income
versus their expenditures they spend
more than they make so here expenditures
are up on top so they’re not doing swell
there at the moment and we have
long-term debt versus cash and
equivalence so here in the blue up at
154 billion dollars is their long-term
debt now how much cash does this
business have in cash and equivalents
well it has sixteen point seven two
billion dollars in comparison to their
debt load of a hundred and fifty four
billion dollars so kind of interesting
a lot of there’s a lot of weight holding
down this company their earnings isn’t
increase in their return on invested
capital is not increasing their debt
load is you know ginormous their
earnings are projecting and guiding
lower year after year they have just a
ton of debt they’re not trying to you
know they’re obviously they’re
collecting more as the 2012 they just
been steadily increasing increasing
increasing yes the feds been coming out
and raising rates they’re gonna be
cutting it but that’s not going to be
helping them even if they cut rates here
in the short term they’re eventually
going to be raised in them again in the
future and with all this debt load
that’s gonna work against them now
another reason I don’t like this company
is that as III invest in growth
companies I invest in dividend companies
I would call myself I guess I primarily
hold a lot of funds think my ratio is
maybe 44 percent ets and funds and about
50 or so percent single stocks somewhere
within that range actually I actually
hold more much more funds if I bring in
my wife’s portfolios but I like to
invest in some single stocks that kind
of brings it fun and entertainment so
dividend yield 6.2 you way they pay out
60 cents per year and they pay out about
15 cents per per not quarterly yeah 15
cents quarterly 60 cents per year that
gives them a payout ratio forty three
point five now you would expect them to
with the payout ratio forty three point
five to be fairly reliable and safe but
they don’t increase their dividend
hereafter year this is not considered a
dividend growth investment this company
here does not grow their dividend year
after year instead what they’ve done is
they’ve you know cut their dividend they
had a crash in 2000 they started cutting
their dividend they couldn’t sustain it
they were going into another recession
they cut it out completely now they
started raising it again in early 2011
2000 and you yeah that’s correct
2011 they started raising it and in 2015
they 2015 guess what rubber what happen
there
their debt started climbing really fast
really hard here here’s our 2015
period here we can see just started
climbing their debt and I thought that
was another area here maybe there’s a
liabilities that has been climbing here
as well but they just had they couldn’t
sustain it they could not raise their
dividend because of their debt just
increasing it was becoming unbearable so
they’ve had some special payouts I don’t
think they should be doing that things
should be focused on paying down debt
figuring out what they need to be doing
to get back in the business of growing
their earnings grow in their return on
the best capital growing in declining
you know declining
their debt and creaming increase in the
income and such but they have a lot of
things to be fixing right now and pretty
much why I myself would not invest in
this company now I do hold you know how
old quite a bit of companies and if I
were to compare it I’m not going to be
doing a comparison to my companies at
all but there is just a bunch of signals
that I look for and if a company has any
one of those signals decreasing earnings
decreasing lighting’s per share
decreasing income decreasing free cash
flow decreasing revenue year over year
decreasing return on invested capital
you know taking on much more debt
expenses blowing out their income you
know there’s so many little red flags
are within the company that I’ve kind of
just shown you that all makes me a lot
of you know wary whether it’s short term
or long term I don’t think this company
is sustainable at this point I think
they will continue to fall investors
might gobble it back up below eight
dollars as it becomes priced at that
point I think there’s not a lot of
investors out there and even
institutional investors who just it’s a
it’s an American company and as
investors said here so you know I
believe in the Ford brand with the
potential of automation and commercial
delivery taking the big steps in the
future with the restructuring to only
increase their bottom line I don’t ever
seen it going out of business and
growing stronger and I don’t think
they’re strong in their own niche I’ve
owned Tesla I’ve owned Ford in the past
and Tesla is currently winning the world
right
now a lot of investors are following it
it’s taken over their price in their
video calls low so that they can outbid
and get more of their vehicles on the
front line so Tesla’s moving towards
profitability here probably in the next
one or two years or last once it happens
their price should move higher now
that’s here probably kind of going
through here I know there’s a lot of
talk I know there’s a couple others out
here who are just they want to see Ford
continuing to move higher they don’t
want they don’t see Ford going for
bankruptcy or ever disappearing they
make quality cars but just because a
company makes a product that’s quality
doesn’t mean that it’s profitable I can
come out here and make an amazing
product and provide it for people you
know individuals but if there’s another
shiny toy out there and that shiny
plastic wrap on the side is a Tesla and
everybody wants one they don’t want to
play by and a Ford I know that’s just my
opinion but we’ve gone over on this
video long enough let me know in the
comment section below what do you think
of or do you think I have gone and maybe
misrepresented Ford do you think it’s
going to show much more profitability
here in the future let me know in the
comment section below I think there’s a
lot of red flags with this company based
off the information that I covered here
today and I would just like to see other
people’s opinions of course I am NOT an
investor of Ford I would not be buying
Ford myself at this I don’t plan on
buying for here in the short term you
know that all the you know so again I am
NOT a financial adviser tax accountant
so if you have any questions pertaining
to your investments go out there seek a
financial adviser or planner and ask
some questions pertaining to this but
here I just kind of covered some of the
facts and let me know in the comment
section what you thought if you are
brand new to the channel have not yet
subscribed hit that subscribe button
below if you do enjoy this video find a
helpful with the thumbs up and if you
have any comments questions drop them in
the comment section or join over our
Facebook groups again those three are
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dividend growth in
and the FI real estate investing all
looking to build your financial
independence so thank you all for tuning
in I will see you next time have a great
day bye

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7 Comments

  • Reply Financial Investor July 26, 2019 at 8:07 pm

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  • Reply All Good July 26, 2019 at 8:47 pm

    Don't own F due to instability of dividend payouts. Just my opinion. Thanks for the analysis, make sense.

  • Reply Michael Hayes July 26, 2019 at 10:12 pm

    There's another 4 letter word starting with F that i can imagine heavy Ford investors might be saying to themselves in the not too distant future.

  • Reply Mike's Personal Finance July 26, 2019 at 11:15 pm

    Heavy dependence on F150, falling behind on everything else in the industry. High dividend yield which will be cut quickly in a downturn. I personally wouldn't touch it, but it's definitely not the worst company in the world. Very difficult industry to make money consistently. I see a yield trap, but it might pay off if they can evolve as a company in the near future.

  • Reply Jokeasterfe July 27, 2019 at 4:38 am

    I don’t like F’s Beta. Like a kid on a swing.

  • Reply David Pollard July 27, 2019 at 5:03 pm

    I own some F, but wouldn't buy more at current price. My average cost right now is $8.50. If it dips back to that level I might pick up some more, provided there's not any further deterioration in financials. One thing I didn't hear you mention, that may effect their long term prospects, is their new arrangement with VW on the development of electric vehicles.

  • Reply Arvabelle July 28, 2019 at 2:25 am

    I considered getting into Ford for the dividends, but decided not to. I'm not sure how they'll perform with other companies releasing more and more electric cars…and I just don't necessarily like their numbers.

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