Tuesday, April 18

Today we examine the historical pillar of automotive history – Ford. Currently they’re in a bit of a slump – they’ve lost 13% of their value this month. However, they are usually the healthiest of the US manufacturers. On average the F-150 sells 60,000 units in any given month, and it remains the best selling vehicle in history. That automotive gushing aside, they’re set to fall a bit in 2017 – EPS consensus for Q1 is $1.62, down from $1.74 last quarter (Ford’s own guidance says to expect a fall as well). Does that by itself translate to a 13% loss in market value? Certainly not.

Unfortunately analyst consensus is a little stale at this point (the bulk of it was formed before the 15% slip that started on March 22), yet it was at a strong $14 at last check. Cutting to the chase – I would recommend a more conservative target of around $13, which I think is more realistic in the next 12 months. That target is just $0.10 higher than the price before the mid-March slip.

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We can also see that technical factors are indicating a breakout (when those two lines meet). Though I’m generally skeptical of technical factors, with such a widely traded stock they’re a little more reliable (just the spread today had more than 200k shares at any given time). Based on the short term outlook with EPS down and sales looking bleak I think we’re fairly likely to see a downward break sometime in the next month or two.

Even with that as my prediction, we’re strongly considering acquiring a position in ford this week. I think the target at $13 is reliable, for a 16% gain. On top of that, Ford’s rock solid distributions have reached 5.32% annually for a total return around 20%. If it falls in the next few weeks we’re simply presented a good opportunity to grow the position.

 

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