F-150 Sales Surge Will Drive Ford’s Q2 Earnings

Ford stock (NYSE:F) is expected to publish its Q2 2024 earnings in the next few weeks, reporting on a quarter that is likely to see the company’s sales cool off a bit, amid easing consumer spending. We project that revenues will come in at about $41 billion, marking a 3% decline versus last year, while earnings are likely to come in at $0.62 per share, slightly ahead of consensus estimates. Ford stock has been a mixed performer this year, rising by just 5% year-to-date, compared to rival GM (NYSE:GM) which has gained close to 30% over the same period. So what to expect as Ford publishes its results?

There are some concerns for the automotive market. While consumer prices in the U.S. have been rising, with the CPI up 3.3% in May, the most recent data available shows car prices have been declining. The average price paid for new vehicles declined by 3% for the first six months of this year, compared to the same period last year, per research firm J.D. Power. Demand could also cool a bit in the near term as consumer confidence in the U.S. weakens and high interest rates make financing vehicle purchases more expensive. That said, Ford saw its overall volumes for Q2 rise by about 1% year-over-year. The growth was driven primarily by the company’s trucks, which witnessed a notable 5% rise in volumes.  Sales of the flagship F-Series trucks reached 199,463 vehicles, increasing 30% sequentially likely as production of the new 2024 F-150 truck ramped up. This could potentially bode well for the company’s average selling prices in a mixed automotive market. The F-150 series of gasoline trucks remains the company’s single most lucrative product line with higher margins for trucks compared to other body styles.

F stock has seen extremely strong gains of 45% from levels of $9 in early January 2021 to around $13 now, vs. an increase of about 50% for the S&P 500 over this roughly 3-year period. However, the increase in F stock has been far from consistent. Returns for the stock were 136% in 2021, -44% in 2022, and 5% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that F underperformed the S&P in 2022 and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Consumer Discretionary sector including AMZN, TSLA, and HD, and even for the mega-cap stars GOOG, MSFT, and AAPL.

In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could F face a similar situation as it did in 2022 and 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?

Although there are concerns about the broader automotive market amid a mixed macro picture and high interest rates, there are some positives for Ford as well. While the relatively slow pace of Ford’s EV transition was a headwind for the stock previously, we believe this should ease considerably. The EV market has been slowing down, with demand cooling and stock prices of EV bellwether Tesla witnessing considerable volatility this year. Slower growth in EV demand could give Ford more time to monetize its gas-based vehicles while investing in long-term electric vehicle developments. The market for Hybrid vehicles is also picking up and Ford is seeing its hybrid sales expand considerably, rising  56% year-over-year to a new quarterly record of 53,822 units in the U.S. for Q2. Ford’s valuation is also attractive, with the stock trading at 7x 2024 consensus earnings. We value Ford stock at about $15 per share, which is around 17% ahead of the current market price. See our analysis on Ford Valuation: Expensive Or Cheap for more details on what’s driving our price estimate for Ford.  For more information on Ford’s business model and revenue trends, check out our dashboard on  Ford Revenue: How Ford Makes Money.

[1] Returns as of 7/7/2024
[2] Cumulative total returns since the end of 2016

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