Ford (F) reported Q4 earnings last week and the results were mixed. The company reported total revenue of $41.8 billion, Automotive revenue of $38.7 billion and non-GAAP eps of $0.30. Ford missed on non-GAAP eps, but beat on Automotive revenue. The stock is up over 5% post-earnings. I believe Ford is a sell for the following reasons.
The Global Economy Is Showing Cracks
The U.S. economy has been in expansion mode for the past decade. The economy has been propped up by trillions in stimulus from the Federal Reserve and recent tax cuts from the GOP. Central bankers from around the world replicated former Fed Chairman Ben Bernanke’s policy of zero interest rates and liquidity into financial markets. Recent Fed rate hikes and balance sheet unwind have removed the punch bowl, somewhat.
The economy cannot rise in perpetuity. The International Monetary Fund (“IMF”) seems to agree with that assessment. The IMF cut its forecast and expects the world economy to grow 3.5% in 2019, the weakest pace in three years. The IMF also cited trade tensions as a headwind. However, I believe trade tensions or a U.S. government shut down are mere distractions from the truth; tax cuts and stimulus designed to spur business fixed investment with the hopes they would trickle down to the masses have run their course. If the economy is headed lower then that does not bode well for cyclical names like Ford. Read more:
