According to the forecast of one expert, investors should steer clear of Ford stock . A recession is on the horizon; as a result, U.S. car manufacturers and, in particular, the shares of Ford Motor Company ( NYSE:F ) should be sold.
Ford Stock from Hold to Sell
On Monday, UBS analyst Patrick Hummel moved the Ford stock from the Hold rating to the Sell rating. That was his new price goal from $13 down to $10.
It was brought to Hummel’s attention that Ford’s operational profit margins in North America are lower than those of General Motors GM -5.13% (GM) and Chrysler parent Stellantis (STLA). The analyst noted in the research that he was downgrading that “in light of the expected recession, has the highest probability of testing break-even thresholds,” which was included in the report.
Through the end of June, Ford’s sales in North America were around $51.4 billion, resulting in an operating profit of approximately $4.9 billion. That equates to a profit margin of around 9.5% of the total.
During the first half of 2022, the operating profit margin for Stellantis North America is projected to be around 18.1%. Although GM’s operating profit margin was comparable to Ford’s, GM’s production delays caused by a lack of available parts caused some of the company’s earnings to be moved from the second to the third quarter.
If a recession is on the horizon, Ford’s Hummel doesn’t think it will be possible for the firm to reach its target of ten percent operating profit margins. As a result of the declining profit margins, he revised his forecast for the company’s earnings in 2023 to 52 cents per share, down from 1.35 cents.
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