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
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