What happened
Beginning last month on an inauspicious note, Ford (F -1.06%) reported its fourth-quarter 2022 financial results after the market closed on Feb. 2. The report failed to rev up investors' engines, and the following day, shares closed 7.6% lower, contributing to a slide that extended through the month. According to data from S&P Global Market Intelligence, shares of Ford fell by 10.7% in February.
Besides the company's Q4 earnings and 2023 forecast, production delays and negative sentiment from Wall Street contributed to the month's sell-off.
So what
With adjusted earnings per share of $0.52 in Q4, Ford came up short of the $0.62 that analysts had expected. It also missed its own guidance. At the end of 2021, the company forecast 2022 adjusted earnings before interest and taxes (EBIT) of $11.5 billion to $12.5 billion. Looking ahead to 2023, investors seem to be uninspired with management's adjusted EBIT forecast range of $9 billion to $11 billion. An expected decline in free cash flow also concerned investors. Whereas Ford generated adjusted free cash flow of $9.1 billion in 2022, management projects this will decline to about $6 billion in 2023.
In the middle of the month, Ford announced a temporary halt to production of its F-150 Lightning due to complications with batteries used in the electric pickup truck. Consumer interest in the F-150 Lighting has been supercharged since the company revealed the EV. Critics are enthusiastic as well: The F-150 Lightning won the 2023 MotorTrend Truck of the Year award. To the chagrin of investors, production of the Lighting F-150 failed to resume in February.
A flurry of analyst commentary regarding the company provided another catalyst for last month's decline. On Feb. 3, Emmanuel Rosner of Deutsche Bank downgraded the stock to sell from buy and assigned it an $11 price target. The day before the analyst's action, Ford was trading at around $13 per share. About two weeks later, Barclays initiated coverage on the stock with a $13 price target, and Tudor Pickering downgraded the stock to hold from buy.
Now what
While Ford was unable to meet analysts' expectations at the bottom of the income statement, it would be inaccurate to view its financial results as dismal. Its 2022 adjusted free cash flow of $9.1 billion represented a pleasant surprise -- management had forecast 2022 adjusted free cash flow of about $6 billion at the end of 2021.
With regards to the F-150 Lightning, the company has announced that production is expected to resume next week. Naturally, investors will want to confirm that production resumes without a hitch and that it doesn't encounter further obstacles.
In the wake of a sell-off that seems a little excessive, investors have an opportunity to park this quality dividend stock in their portfolios at a more attractive price.
