Stock of the day 02/01/2015 – Ford Motor Co

US motor giant Ford had a mixed 2014, with a sharp drop in the latter half of the year. The car manufacturer will be hoping to put its woes to bed with a strong December 2014 sales release on Monday.

Ford looks set to start 2015 at similar levels to 2014, with last January seeing an open of $15.41. The first half of the year saw a gradual climb for Ford which culminated in what turned out to be its 2014 high of $18.12 on July 24th. After slipping slightly the company managed to maintain these levels until a disastrous September saw share prices plummet.

The company were forced to announce it would miss its profit forecast for 2014 at the end of September. Economic troubles in Russia had severe consequences for Ford’s sales, alongside deflation in South America and the costs of a recall in the US and Canada all contributing to this profit warning. This news saw stocks fall 7.41% to $15.11; prices continued to fall after it was revealed that September sales had fallen 3%, leading to Ford’s 2014 low of $13.27 in mid-October. Prices recovered slightly following acceptable October sales; however, November sales saw a 2% drop to 187,000 which prompted analysts to downgrade the company, causing another 5% drop back down to $14.28. 



This second-half slump has been attributed to the declining price of used cars as well as an economic situation that has led to a decline in new-car affordability. On top of this, the US dollar’s strong performance in the latter half of the year has meant that foreign cars have become more attractive to newly competitive prices. 

Yet there is some reason for Ford to be cautiously optimistic in the New Year. Whilst the Russia situation, combined with the general economic crisis in Europe, has led to the car company struggling on the continent, Ford is making increasingly successful attempts to reverse this slump. And it is set for a big advertising push this year for its new F-150 truck; with the F-series being one of, if not the, most popular line of cars for Ford, the success of the F-150 will play an important part in its 2015.

Ford has also see rapid growth in China, with a 49% sales increase in 2013 being followed by a 26% increase in the first three quarters of last year. Whilst sales began to slow down in the final few months of the year, Ford is committed to continuing its successful expansion in this part of the world. 

Despite these factors, analysts (including Deutsche Bank and Zacks) are still tentative about the stock, with a consensus of a ‘hold’ rating and an average target price of $16.47. A strong showing from December sales may prompt a turnaround and the perfect start to 2015. However Ford will need to brace itself in case of another fall, as the markets have not responded kindly to the company’s announcements in the last few months.