The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.
Ford will announce its numbers at 12pm on Friday 24 October. The automaker’s share price collapsed at the end of September when the company warned that full-year profits will be in the region of $6 billion, which is considerably lower than the previous guidance of somewhere in between $7 billion and $8 billion.
The America’s business bore the brunt of the blame; the South American unit registered a loss of $900 million and the recall of vehicles, mostly in North America, is to set the business back around $1 billion more. Operations in Russia made a loss of $300 million. Its Russian business was slipping even before tensions arose over Ukraine, and now falling demand and a weakening rouble are compounding the problem. Ford’s European business is expected to back to profit in 2015.
To cushion the blow of the profit warning, the Detroit-headquartered company stated that revenue from its North America business will increase by 20% by 2020, although profit margins would decline to a high single digit.
In the wake of a profit warning one would expect a jump in the number of speculators shorting the stock, but short interest actually declined by 5.7% at the end of September.
Analysts are expecting third quarter revenue to come in at $33.31 billion and an EPS of $0.19. This represents a 5.6% and a 52.5% decline from Q2 revenue and EPS.
The stock is off its recent lows of $13.26, which coincided with the spike in the VIX and the plummet in the S&P 500. Year-to-date the share price is down 7.8%, whereas General Motors has lost 22.5% over the same period, Ford’s share price hit a three-year high in July, but the profit warning last month brought it back to levels not seen since April 2013.
Equity analyst recommendations are heavily weighted on the buy side; out of the 28 ratings, 15 are buys, 12 are holds and only one is a sell. The average target price of the 28 recommendations is $17.81.
Ford is trading at $14.28, with the 200-week moving average providing support at $13.79. If Ford confirms full-year guidance will be met without additional revisions, the stock may target the 100-week MA of $15.47. If confidence is restored in the medium-term, the next level up is the 200-DMA of $16.13.