Shares of automaker Ford (F) are down in today’s trading as investors await its Q3 earnings results on October 28 after the market closes. Analysts are expecting earnings per share to come in at $0.46 on revenue of $45.1 billion. This equates to 18% and 3% year-over-year increases, respectively, according to TipRanks’ data.
This is ideal because earnings per share should grow faster than revenue as this demonstrates a high degree of operating and financial leverage in the business. However, it’s also worth noting that Ford has a choppy record when it comes to beating earnings estimates, as it has only done so twice during the past four quarters.
Potential Catalysts
Ford will likely continue to have a choppy record since the auto industry is cyclical and fairly challenging to predict. However, there might be some positive catalysts that could help the firm. One such tailwind might be falling interest rates, as central banks continue to lower them now that inflation has become more manageable. Although the Federal Reserve may take longer than expected, other countries, like Canada, are moving at a faster pace, which is likely to stimulate international demand.
Nevertheless, there are always potentially negative catalysts that investors need to consider. Indeed, it appears that Ford may be losing ground to Tesla (TSLA) in the electric vehicle segment, as Tesla’s Cybertruck has managed to overtake Ford’s Mach-E to become the third best-selling electric vehicle in the U.S. This is despite the fact that the Cybertruck is more expensive.
What Do Options Traders Anticipate?
Using TipRanks’ Options tool, we can see that options traders are expecting an 8% move from Ford stock in either direction right after its earnings report. The expected earnings move is determined by calculating the at-the-money straddle of the options closest to expiration after the earnings announcement.
It’s worth noting that Ford’s after-earnings price moves in the past 13 quarters have mostly been smaller than the 8% that is expected. This implies that current option prices might be overvalued.
Is Ford Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on Ford stock based on five Buys, nine Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 5% rally in its share price over the past year, the average F price target of $12.12 per share implies 9.14% upside potential.
