Ford Motor Company (NYSE: F) released fourth-quarter earnings after the bell on Wednesday, and results were mixed, beating on revenue but missing on Wall Street’s earnings expectations. F stock wavered, dropping about 1 percent in after-hours trading.
The Michigan automaker had pretty lousy recent returns coming into Wednesday’s report; over the last year, Ford stock was down 2.5 percent as the larger U.S. market, broadly represented by the Standard & Poor’s 500 index, roared 25 percent higher.
[See: 7 of the Best Blue-Chip Stocks to Buy for 2018.]
And while fourth-quarter Ford earnings didn’t give much justification for that performance gap to continue widening, they didn’t give much justification for closing it, either.
Here’s a closer look at the numbers:
F stock earnings by the numbers: Q4 2017. Adjusted earnings per share came in at 39 cents, up a solid 30 percent from the same period a year ago. Fourth-quarter revenue was $41.3 billion, up nearly 7 percent from the $38.65 billion it earned in Q4 2016.
Analysts surveyed by FactSet were expecting EPS of 43 cents on revenue of $36.26 billion in the quarter. While a revenue beat of that size is nothing to scoff at, neither is the earnings miss, which spells loudly and clearly that margins are on the decline. Automotive operating margins fell a full 2 percentage points to 3.7 percent in the fourth quarter.
More solemnly, Ford doesn’t expect profits to improve much in 2018, and in fact sees them coming in lower. The automaker guided for EPS between $1.45 and $1.70 in 2018, down from the $1.78 per share it earned in 2017. Automotive market share fell one-tenth of a percentage point to 6.6 percent.
Ford stock: a bit too steeped in tradition. During 2017, the F-Series was again the best-selling pickup truck on the market — for the 41st consecutive year. And anyone who owns F stock will be happy to know the company set a new record for SUV sales.
But the future of the auto industry is heading elsewhere, to all-electric, fully autonomous vehicles.
Ford’s stepping up its investments here, devoting $11 billion to electrification by 2022, but Ford’s legacy-heavy fourth quarter underscores the fact that it’s still way behind its biggest rival, General Motors Co. ( GM), in electric vehicles and autonomy.
As Tesla ( TSLA) led the charge and garnered pent-up consumer demand for electric and autonomous cars, GM spent a combined $2 billion on strategic investments in 2015 and 2016, acquiring self-driving startup Cruise Automation and a stake in Lyft.
More important than Ford’s ho-hum fourth quarter is how it invests for the future. Despite emphasizing its own partnership with Lyft that will bring autonomous Fords to Lyft’s fleet in 2021, this pales in comparison to GM’s plans to release fully autonomous “robo-taxis” at scale in major urban areas in 2019.
It’s a good thing Ford is devoting $11 billion to electrification over the next four years. But being slowfooted in what’s arguably the auto industry’s most material evolution ever was costly. If Ford had touted a meaningful new partnership or acquisition in electrification rather than its success selling gas-powered pickups and SUVs, fourth-quarter earnings would give more reason to inspire.
The one bright side to F stock. There’s not much to be immediately excited about in the underlying business today. The only bright side to Ford stock is its dividend yield. Shares yield 5 percent, more than double the yield of the S&P 500, and it’s easily able to afford it, using just 33 percent of profits to do so.
Realizing its strength, Ford stayed in its lane and doubled down on the dividend, shelling out a one-time “supplemental” quarterly dividend to shareholders of 13 cents a share. Considering its already impressive quarterly dividend is 15 cents, this hefty $500 million return of stagnant capital is a good move.
[See: 7 of the Best Stocks to Buy for 2018.]
Ford stock also boasts a nominally low price-earnings ratio, just 10.9 as of Wednesday’s market close. To some, this implies the market is overly pessimistic on shares. But in fact, with analysts expecting flat revenue and a per-share earnings slump of 10 percent in 2018, why should investors pony up any more than that?
Ford has lost a step since the days of its eponymous founder, whose innovation of the assembly line became emblematic of capitalistic efficiency. Cars have always been a cutthroat business, but with new innovators like Tesla, Google ( GOOG, GOOGL) and Apple ( AAPL) bringing their outside tech expertise to compete — and GM adapting more quickly — Ford finds itself a day late and a dollar short.
And with autos being a cyclical industry, it’s no stretch to see why Wall Street seems to think Ford’s peak might be in the rearview mirror.
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Ford Motor Company (F) Stock: Big Dividends, Zero Inspiration originally appeared on usnews.com
