If you buy a stock before an earnings event, the risk is elevated, and you need to be confident about the company’s growth trajectory. As it turns out, Ford Motor (F) is about to report its earnings data. As a cautious investor, I am bearish on Ford stock because the company’s already-released sales data raises concerns.
Ford Motor is an automotive giant that sells both conventional and electric vehicles. The company pays a decent dividend and, as we’ll discover, Ford shares appear to be bargain-priced.
On the other hand, it’s not a great idea to jump on a stock just because a company has a low price-to-earnings (P/E) and offers a big dividend. It’s just as important for an automaker to demonstrate sales growth, and in that regard, Ford’s gears are stuck in reverse.
You’ve heard about value traps, and maybe you’ve heard of yield traps. Could Ford fit into both of these categories? It’s entirely possible, so let’s delve into Ford’s details and see if there’s a value-and-yield trap with F stock.
Ford has a non-GAAP trailing 12-month P/E ratio of 6.77x, which is certainly lower than the sector median P/E ratio of 14.98x. Furthermore, offers a forward annual dividend yield of 7.05%, which seems more favorable than the Consumer Cyclical Sector Average dividend yield of around 1%.
Don’t jump to any conclusions, though. It’s possible for a company to have a very low P/E ratio and a very high dividend yield, like Ford does, if the share price drops sharply. It wasn’t too long ago when F stock plummeted from $14.50 to $11. Rapid, steep stock-price collapses can create distortions in P/E ratios and dividend yields, so don’t enter into any hasty trades with Ford stock right now.
Quarterly financial reports can cause a stock to rally or tank. Nevertheless, some risk-takers will grab shares of Ford stock today, even though the company is set to disclose its third-quarter 2024 financial results on October 28, which is coming up very soon. So, there’s already reason to feel neutral about Ford stock right now.
Yet, I’m actually feeling a little bit bearish about F stock before the company’s earnings event, and there’s a specific reason for this. I don’t have a crystal ball, but we all can look at Ford’s third-quarter 2024 vehicle sales numbers before the automaker’s financial results are to be released. Specifically, Ford sold 504,039 units versus 500,504 units in the year-earlier quarter, and that only represents a 0.7% year-over-year increase.