Ford Stock Declines 9% Since Q3 Results: What Should Investors Do?

Core Viewpoint - Ford's third-quarter 2024 results revealed a significant decline in net income by 25% to $900 million, primarily due to losses in its electric vehicle (EV) business, leading to a downward revision of its full-year EBIT forecast to around$10 billion [1][12]. Financial Performance - Ford's stock has dropped 8.8% following the earnings report and has underperformed with a 17% decline over the past six months compared to its peers and the broader market [2]. - The company anticipates a loss of $5 billion in its EV business for the year, exacerbated by ongoing pricing pressures and increased investments in next-generation EVs [10]. Segment Analysis - The Ford Pro unit has shown strong performance, with revenue and volume growth of 13$1.8 billion, up from $1.7 billion [5]. - Subscriptions to Ford Pro software increased by 30$9 billion in 2024, driven by strength in vehicles, software, and services [7]. Challenges - The Model e segment, dedicated to EVs, faced an 11% drop in wholesale volumes and a 33% revenue decline, with a loss before interest and taxes of $1.22 billion [9]. - Warranty costs and quality issues have led to elevated expenses, with significant improvements expected to take up to 18 months [11]. - Higher inflation and increased material prices are anticipated to further pressure margins, leading to a reduction in overall EBIT forecast for 2024 [12][13]. Investment Considerations - Ford's high dividend yield of over 5% is attractive compared to the S&P 500's average yield of 1.24%, with a commitment to distribute 40-50% of free cash flow [8]. - Despite the promising growth in the Ford Pro division, ongoing challenges in the EV sector and warranty costs create a difficult environment for profitability [14][15].