Market Overview

Why Is Ford Stock Down When Production Is Increasing? (F, GM, TM)

Ford (NYSE: F) stock is down over 15% from January highs, even with the company announcing that production will be significantly higher this quarter. After a disappointing earnings announcement caused a sharp decline in Ford's (NYSE: F) stock price from $19 to $15.50, Ford announced that it will increase production in the United States by 13% this quarter.

While Ford made it through the recession without a government bailout - unlike competitor General Motors (NYSE: GM) - Ford experienced a significant decline in its stock price and provided what might be an excellent entry point for investors.

Due to the announcement, in pre-market trading, Ford is trading slightly higher than Friday's close of $15.72. The announcement is indicative of Ford's continued popularity in the automotive industry and will likely show investors the strength and influence Ford has over the market. With a forward P/E of 8.15, Ford may still be a great long-term investment.

However, there are some intrinsic issues with Ford's balance sheet. For example, using data from Q3 2010, Ford has a low current ratio of .97, indicating current liabilities that exceed current assets. Compared with Toyota (NYSE: TM), its current ratio is 1.22. While Ford has a higher inventory turnover than Toyota, the fact that it has more liabilities than assets is a cause for concern and would likely indicate trouble if a slowdown in vehicle sales were to ensue.

Disclosures: long F

Neither Benzinga nor its staff recommends that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

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