Ford Motor Co. (NYSE: F) is the Rodney Dangerfield of U.S. automakers. It doesn’t get any respect from investors.
Ford shares have backfired and sputtered for most of 2017. The competitor’s shares, on the other hand, have shot ahead like super-charged Mustang. General Motors (NYSE: GM) shares are up 25% year to date; Fiat Chrysler (NYSE: FCAU) shares are up 89%.
As for the Italian-American FIAT, it’s all about share-price appreciation. A dividend isn’t on offer.
Perception must be Ford’s problem. It can’t be reality.
Ford is perceived as embodying more of the 20th century than the 21st. The continual success of the F-150 truck series fuels the perception.
The F-150 has been the best-selling vehicle in the United States for the past three decades.
Recent sales trends point to the streak going unchallenged for another decade.
Ford reports that F-150 sales were up 14% for the latest quarter. Ford also reported customers paid an average of $45,400 per F-150, up $2,800 from a year ago.
The reality is that Ford depends on the F-150 to make money. The good news is that the F-150 delivers.
The latest quarterly numbers — driven by the F-150 — were respectable. Ford reported a 63% increase in net income. EPS posted at $0.39 to easily breeze past consensus estimates for $0.33.
Strong End to 2017 for Ford
Ford should end 2017 better than it ended 2016. Management expects full-year EPS to post between $1.75 and $1.85. The consensus estimate had EPS pegged at $1.74 for the year. Either way, you’re looking at a forward P/E multiple below 10.
Though the F-150 is a perpetual money maker, it’s a boring money maker. It’s a truck, after all. What’s more, it’s a truck powered by technology of the 19th century. It’s powered by an internal-combustion engine. It’s driven by something carbon-based, as opposed to something silicon-based.
Ford’s chief rival GM, though every bit as hidebound as Ford, has emerged as a leader in the 21st-century world of plug-and-play electrics. Its Chevy Volt has been established has set the stage for GM to advance into self-driving electrics. GM will soon test a self-driving Chevrolet Bolt in New York City.
Even Fiat Chrysler, which has dragged its heels in developing autonomous electric vehicles, has picked up the pace. Fiat Chrysler will enter the electric space as partners with Germany’s BMW and suppliers Delphi and Intel (NASDAQ: INTC).
Ford is the last of the “Big Three” to stick a finger into the electric socket. It announced last year that it will spend $4.5 billion on electric vehicles. When the $4.5 billion will be spent and how allocated to self-driving technology remains to be seen.
Investors perceive Ford as a technology laggard. On this front, perception comports with reality. But is that so wrong if the technology has little economic value to date?
Electric cars are a niche market. What’s more, it’s a niche market that loses money, and gobs of it. One need look no further than Tesla’s (NASDAQ: TSLA) income statements for proof.
The market for electric cars is not only a niche market, it’s a precarious market.
Bureaucrats in California, Europe, and China have conjured the electric-car market not from legitimate consumer demand but from backbreaking regulation devoid of cost-benefit analysis.
What one set of bureaucrats give, a subsequent set can easily take away.
Recent political maneuvers involving coal prove the point: The previous presidential administration attempted to kill coal through government edit (and nearly succeeded). The current presidential administration is attempting to revive coal through government edict.
What makes electric, self-driving cars sacrosanct? Nothing but the whims of political fashion.
Let someone else lose money developing dubious electric/autonomous technology, and then pinch the technology if need be. In the meantime, focus on selling what customers really want.
Ford Dividend Yield in Focus
In the United States, customers want heavyweight vehicles, such as trucks and SUVs, and they’re willing to pay higher prices. Ford has focused on the politically unpardonable — giving its customer what they demand.
Yes, perception might cause Ford’s share price to lag. As long as Ford continues to perfect what makes money — the F-150 — income investors can be assured that the Ford dividend is built to last. That’s reality.
What’s built to last and yields 5% — the Ford dividend yield — is eventually worthy of investors’ respect.
— Steve Mauzy
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Source: Wyatt Investment Research