Good News For Ford Motor Company (F) Stock Isn’t Quite Good Enough

In the long-running “value play or value trap?” debate over

Ford Motor Company (NYSE:>F

) stock, I’ve generally taken the “value trap” side. Ford stock is cheap, trading at 7.4x 2017 analyst EPS estimates. With F stock yielding more than 5%, I can, perhaps, see an argument for income investors to consider the stock.

Good News for Ford Motor Company (F) Stock Isn't Quite Good EnoughSource: Jens Mayer via Flickr (Modified)

But, I still believe Ford has a major problem: the very real likelihood of “peak auto.” Increasing penetration of electric vehicles and the long-term influence of autonomous driving both represent long-term concerns for F stock.

Ford appears behind in both of those categories, one reason the company’s CEO was replaced earlier this year. I’m skeptical that will be enough for Ford to catch up, however. And in the mid-term, a clear glut of used cars and lower fleet sales both provide headwinds as well.

The uncertain outlook seems to justify the low price and multiples assigned to Ford stock. And, it’s enough to offset some recent modestly positive news that, I’ll admit, made me take a second look at F stock.

June Sales Weren’t That Bad

Ford’s U.S. June unit sales of roughly 228,000 were down 5% year over year. While the decline isn’t necessarily bullish for Ford stock, the figure did come in ahead of expectations. (Kelley Blue Book estimated a nearly 10% drop, for instance.) Through the first half of 2017, Ford sales have fallen less than 4%, a slower rate of decline that many F stock bears predicted at the start of the year.

Meanwhile, which cars were sold is just as important as how many, and there was good news for Ford on that front. Passenger car sales fell a whopping 23% year over year for the month. But, SUV sales rose 3%, and truck sales edged up 1.2%. Year to date, SUV and truck sales each are up nearly 3% against 2016 figures.

That’s important for Ford, and potentially a boost for F stock. SUVs and trucks, obviously, have a higher sticker price, meaning the 5% decline in units should actually lead to an increase in total revenue. More importantly, U.S. automakers like Ford and

General Motors Company (NYSE:>GM

) make higher profits on those larger vehicles. Analysts are still expecting a year-over-year decline in Q2 EPS, but the truck and SUV sales might imply that Ford has a decent chance to beat Q2 estimates later this month.

Can China Boost Ford Stock?

Meanwhile, Ford had an impressive month in China. Unit sales there rose 15% in June, clearing 100,000. Lincoln sales rose 84%, and are up 97% year over year through the first half.

Ford has lost market share in China of late to Japanese rivals like

Toyota Motor Corp (ADR) (NYSE:>TM

). And year to date, unit sales in the country are still down 7%. But, the market as a whole had a strong month, and might be set up for a strong second half. If Ford can keep improving its performance in that key market, some of the pessimism toward F stock could abate.

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