Ford: Top EV Auto Stock to Buy Now

Ford Stock is Killing It: Minivans, Electric Vehicles & Jobs

U.S. retail sales are beating expectations despite the current inflationary environment and recession uncertainty. To begin the year, the U.S. economy grew faster than we’ve seen since 1984 – by 5.5%. On a year-over-year basis, retail sales jumped 8.4% and are nearly 20% above pre-pandemic levels. Although automakers continue to face semiconductor shortages and manufacturing disruptions, Ford’s (NYSE:F) outlook for the full-year 2022 remains strong, affirming full-year guidance and assuming a 10% to 15% growth in vehicle wholesales from 2021; strong EBITDA and pricing; strategically planning for the future.

Ford CEO Jim Farley said, “We’re moving with purpose and speed into the most promising period for growth in Ford’s history – to innovate and deliver great products and connected services, raise quality and lower costs…We’re giving customers great experiences and value, improving our profitability and making Ford the next-generation transportation leader.” As the company demonstrates its commitment to customers and its evolving capabilities, the automaker is making headlines resulting from layoffs, discontinuation of its minivan, and a focus on electric vehicles.

Ford Layoffs

Ford is killing 3,000 jobs as a cost-cutting measure and boosting its competitive advantage as layoffs sweep the nation. Although Ford’s North American sales and strong net pricing of $3.3B of EBIT and an 11.3% margin offset higher commodity prices and inflationary pressures, material, freight, and fuel costs continue to rise, taking a toll on companies. In addition, geopolitical concerns and the changing landscape of overseas markets are posing headwinds. With 2,000 salaried positions and 1,000 agency jobs being cut effective September 1st, Ford hopes this will improve their cost effectiveness while benefiting shareholders that recently saw a dividend increase by 50% following strong Q2 earnings on the heels of its popular electric truck.

Ford Electric Vehicles & Minivans

Another area where Ford is killing it – in an excellent way – is the rapid growth of electric vehicles (EV), especially as the rise in gas prices has been astonishing. Strict emissions standards are giving way to EVs, as California’s Air Resources Board plans to ban the sale of gasoline cars by 2035. Following the new Inflation Reduction Act, tax credits stand to benefit companies like Ford, whose preemptive growth investment in the EV space is paying off.

Ford’s F-150 Lightning (pre-orders) has been selling like hotcakes. Ford’s F-150 is one of the most popular vehicles in America. Semiconductor and parts shortages have created a backlog for this first-of-its-kind electric truck, so much that Ford halted production. Despite the headwinds posed by chip shortages and inflationary pressures, as SA Marketplace author Jonathan Weber writes:

“With a forecasted 90% annual growth rate, Ford believes that its EV business will grow at close to twice the rate of Tesla’s EV business (50% longer-term forecast)…Strong growth requires a massive amount of batteries and battery materials as well as other EV-related commodities. Ford has done a good job in securing supply chains for its ambitious growth plans, as the 2023 exit run rate could be at a 600,000 level, while the company plans to be able to produce 2 million EVs by the end of 2026.”

One of my top growth and automotive stock picks, Ford, is up 21% over the last year. However, Ford is axing its Transit Connect van by year-end 2023 following sluggish sales to focus on “continued strong pricing” and cost-cutting efforts. Although Ford experienced some post-pandemic headwinds, resulting in a YTD -27% price performance, the stock’s enviable position on fundamentals compared to Tesla (TSLA) and other auto manufacturers is why I find Ford stock so attractive. Despite production shortages, it continues to see high demand, and its quant ratings and factor grades are excellent.

Ford Motor Company

• Market Capitalization: $62.39B

• Dividend Yield (FWD): 3.87%

• Quant Rating: Strong Buy

• Quant Sector Ranking (as of 8/25): 4 out of 538

• Quant Industry Ranking (as of 8/25): 1 out of 31

A differentiator since the invention of the automobile, Ford Motor Company is leading the way in the design, manufacture, and marketing of vehicles. Evolving technology and semiconductors offer a differentiated automotive experience, and Ford is influencing the tech road maps with its latest EV designs. Ford has a young, dynamic, and competitive CEO. His mantra, “2nd place is just the first loser,” is running through the company’s culture and is motivating employees from the ground up. As President & CEO James Farley said during the Q2 Earnings Call:

“The biggest opportunity to create value at Ford since we scaled the Model T. and at the core of Ford+ are three fundamental promises to our customers: distinctive and breakthrough products and experiences; and always on relationship with Ford every day, every hour, every minute; and ever-improving post-purchase user experiences powered by software.”

While scaling and offering these components, Ford also trades at a substantial discount.

Ford Stock Valuation

Trading under $16 per share and an overall A- valuation grade, Ford comes at a great value, even with its stock price of +21% over the last year. Seeking Alpha’s Valuation Grade provides a unique view of how much a company is worth relative to other stocks in the same sector.

Ford’s Trailing P/E is 5.35x compared to the sector at 13.69x, and with a trailing PEG of 0.02x, nearly 90% below the sector, this stock is a strong buy. In the current environment with rising fuel prices and expansion of charging stations, Ford is one of my Top EV Stock Picks and one of my Top Stocks for 2022 given its favorable Factor grades, which rate investment characteristics on a sector relative basis.

Ford Factor Grades

Not only does the stock showcase its discounted price, Ford also has strong momentum, profitability, and growth and reported excellent Q2 earnings on July 27th.

Ford Growth & Profitability

Ford has continued reaffirming its guidance and outlook, maintaining solid growth and profitability grades. With an A and A+, respectively, the automaker seeks to cut costs and continue diversifying in the auto industry. Targeting 60,000 EVs by the end of next year and 2 million by 2026, Ford’s anticipated growth rate in the EV sector is twice that of the global industry. Ford’s 2022 Q2 results resulted in an EPS of $0.68, beating by $0.23, and revenue of $37.91B which resulted in 17 FY1 Up analyst revisions in the last 90 days.

With strong Q2 cash liquidity of $29B and an excellent balance sheet, Ford increased its regular quarterly dividend to $0.15 a share, returning it to pre-pandemic levels.

Ford Momentum

Strongly bullish, investors are paying higher prices for shares of Ford, whose momentum has been on the rise. Momentum is an excellent indicator for investors to buy rising stocks and sell as they retreat, and it is a vital factor for predicting stock price performance for those wanting to hold long-term.

The stock’s quarterly price performance outperforms its sector peers when reviewing Ford’s above metrics and the B+ momentum grade. Additionally, investor confidence remains high in the EV space, as the stock is exhibiting a grade of B or better for momentum and has remained up 24.96% over the last three months, while the sector is only positive at 7%.

As a company focused on strategy for the future, Ford intends to spend on the most profitable vehicles, including light truck models, electric F-150 Lightning BEV, and the combustion and Ford Blue and Ford Model E. Despite competition from foreign automakers, especially in China, Ford’s capital allocation has improved and healthy return on invested capital, continuing to make this a strong buy according to the quant ratings.

Ford is A Top Growth Stock With Great Value

Ford is a legacy brand that has evolved with the times and now offers an electric vehicle. With tremendous fundamentals, profitability, which includes a cash hoard of $12.4B, and great momentum while trading at a discount, Ford offers a great potential return on investment. EVs linked to semiconductors offer a good balance of growth and value and provide a great play to diversify your portfolio. With a focus on the future and management’s strategic plans and outlook for the future, I believe that Ford is one of the most opportune of the automotive and EV stock picks, but it’s up to you to decide for yourself.

We have dozens of Top Rated Stocks and a vast choice of more Top Growth Stocks. Our investment research tools help to ensure you are furnished with the best resources to make informed investment decisions.