What happened
The stock of Ford (F 0.80%) has had a brutal 2022 so far, with shares of the legacy automaker plunging 46.4% in the first half of 2022, according to data provided by S&P Global Market Intelligence.
Yet there's a fair chance Ford stock could soon bottom out.
So what
Ford kicked off 2022 on a high note. Barely days into the new year, it said the demand for its F-150 Lightning pickup was so strong that the company planned to double annual production capacity to 150,000 units at its Rouge electric vehicle (EV) center in Dearborn. By the end of 2021, Ford had already secured more than 200,000 reservations for the F-150 Lightning, the all-electric version of Ford's popular F-150 pickup that's been America's best-selling truck for 45 consecutive years now.
The F-150 Lightning. Image source: Ford.
Ford soon started taking confirmed orders for the F-150 Lightning, and as planned, began production in April and delivered the first truck in May. Until June 30, Ford had sold 2,296 F-150 Lightning trucks. In between, sales of Ford's other EVs shot up as well, with both the Mustang Mach-E and E-Transit vans posting monthly sales records in May.
The problem is that while Ford's EV sales are gaining traction, it seems to be losing ground elsewhere. Sales of most of Ford's popular gasoline-powered vehicles, for instance, slumped double-digits year over year in the first six months of 2022. They include the Explorer, Expedition, Mustang coupe, Transit vans, and Lincoln Navigator. Also, sales of the F-Series trucks declined 17% year over year in the six months through June.
Although management has repeatedly put the blame for the weakness on the ongoing supply constraints, especially for semiconductors, Ford investors aren't convinced. I don't blame them; they've had other reasons to worry in recent months.
There has been a series of big recalls in recent months, including even the Mustang Mach-E. Ford even stopped selling the all-electric SUV some weeks ago on overheating concerns, and on a separate occasion, also revealed how rising costs have rendered the SUV unprofitable.
The auto industry was already facing a severe crunch in the supply of semiconductor chips when the war between Russia and Ukraine added to the bottlenecks and sent prices of other raw materials higher.
With fears of a recession looming large as well now, investors are worried about Ford's growth ahead.
NYSE: F
Key Data Points
Now what
It could be a bumpy ride ahead, but last quarter, Ford reiterated its 2022 guidance for adjusted earnings before interest and taxes (EBIT) of $11.5 billion to $12.5 billion. That represents almost 20% growth over 2021 at the midpoint. If Ford sticks with the guidance on July 27 when it reports its second-quarter numbers, investors should consider it a positive sign.
The F-150 Lightning should start contributing meaningfully to Ford's top line in the coming months, and the company should be able to resume sales of the Mustang Mach-E sometime soon. Meanwhile, prices of key raw materials, particularly metals used in EVs such as aluminum and copper, are plummeting even as I write this. That should help Ford boost profitability for its EVs, sales of which are already booming.
Ford has sailed through worse storms, and it appears the market has already factored in a recession, going by the sharp recent dip in Ford's shares. The stock more than doubled in 2021, so profit-taking is also partly to blame for this year's crash. Where things stand now, the stock looks primed to rebound in the second half of 2022.
