Why Analysts Are Pessimistic about Ford’s Q4 2018 Results

Ford’s recent stock performance

In the previous article, we looked at how Ford Motor Company (F) stock has managed to outperform the S&P 500 Index in January so far. Other auto companies (XLY) such as General Motors (GM), Fiat Chrysler Automobiles (FCAU), Toyota Motor (TM), NIO (NIO), and Ferrari (RACE) also have witnessed sharp gains, partly supported by the broader market’s recovery.

As of January 18, Ford, GM, FCAU, TM, NIO, and RACE have risen 12.2%, 15.4%, 16.0%, 8.0%, 5.3%, and 13.9%, respectively, month-to-date. In contrast, electric carmaker Tesla (TSLA) has underperformed these companies in January so far. In the last few months, automakers such as Ford have faced negative sentiments from investors due to US-China trade war concerns. Now let’s find out what to expect from Ford’s fourth-quarter earnings results.

Why Analysts Are Pessimistic about Ford’s Q4 2018 Results

Reviewing Ford’s earnings trend

In the third quarter, Ford reported adjusted EPS of $0.29, ~32.6% lower than its adjusted EPS of $0.43 in the third quarter of 2017. However, the company’s third-quarter EPS were slightly better than Wall Street analysts’ estimate of $0.28.

On the day of Ford’s third-quarter earnings release, its stock traded on a negative note in the regular session, but it recovered 3.7% in after-hours trading. Its better-than-expected earnings despite its YoY (year-over-year) fall may have been the key driver of this positive reaction.

Fourth-quarter estimates

It’s also important to note that recently, Ford released worse-than-expected preliminary results for the fourth quarter, which suggested EPS of $0.30. Analysts still expect Ford to report EPS of nearly $0.32 in the quarter, according to consensus data compiled by Reuters. EPS of $0.32 in the quarter would be ~18.6% lower than Ford’s adjusted EPS of $0.39 in the corresponding quarter of the previous year.

Ford’s fourth-quarter sales in its home market have continued to fall YoY, which could be one of the reasons why analysts expect its earnings to disappoint.

Continue to the next article to find out what analysts are recommending for Ford stock right now.