XLY - Ford: A 10% Free Cash Flow Yield And Subdued P/E Make It A Buy

2024-06-24 00:16:12 ET

Summary

• Strong travel is expected around the 4th of July holiday, building on bullish auto sales trends, which should benefit automakers in the second half.
• Ford's valuation is compelling despite challenges, with optimism expressed in the recent earnings report; the options market prices in a 5% move post-earnings next month.
• F stock's free cash flow, dividend yield, and historically low P/E make it a compelling value investment opportunity.
• I highlight key fundamental and technical risks.

Travelers are set to hit the open road this 4th of July. It's expected to be a strong travel stretch, building upon bullish auto sales trends so far this year. According to WardsAuto, May US light vehicle sales increased by 0.8% year-over-year (adjusted for selling days). That resulted in a seasonally adjusted annualized rate of 15.9 million vehicles, above estimates, according to BofA. Amid challenges in the EV market, traditional ICE autos and hybrid vehicles are seeing healthy demand despite an uncertain macro backdrop....

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