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Ford (F) Rises Despite Edge SUV Recall

Tickers in this article: F

Update (4:19 p.m. EST): Updated with closing price, day high and low prices, price change and volume information.

NEW YORK (TheStreet) -- Ford  rose 1.83% to $16.70, up 30 cents from its previous close of $16.40, at the close of the trading day on Wednesday despite the company's announcement that it would recall 27,933 Edge SUVs.

The stock had a volume of 61,678,219, well above its average of 41,896,300. It hit a high of $16.73 and a low of $16.35 for the day.

The Dearborn, Mich.-based automaker announced that it would recall the SUVs, some of which were already recalled in 2012, because of fuel leaks that could lead to fires. The company will recall the 2012 and 2013 models that were manufactured from Sept. 2010 to April 2013 and that are fitted with 2.0L engines.

"The fuel line pulse damper metal housing may crack as a result of an improper manufacturing process. A cracked fuel line pulse damper housing may result in a combination of fuel odor, seepage, or a continuous leak while the fuel system is pressurized," Ford told the National Highway Traffic Safety Administration, according to The Detroit News.

Ford said it is aware of 24 warranty claims for fuel leaks in vehicles built after the Edge recall (which totaled 5,845 vehicles) in 2012. None of the new incidents are tied to the vehicles in the 2012 recall, but Ford decided to include them in this latest recall anyway. The company has been investigating this problem since June, when it encountered nine reports of warranty claims for fuel leaks or odor.

TheStreet Ratings team rates FORD MOTOR CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate FORD MOTOR CO (F) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in stock price during the past year, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 12.7%. Since the same quarter one year prior, revenues rose by 11.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Net operating cash flow has increased to $3,840.00 million or 12.05% when compared to the same quarter last year. Despite an increase in cash flow, FORD MOTOR CO's cash flow growth rate is still lower than the industry average growth rate of 30.74%.
  • FORD MOTOR CO's earnings per share declined by 24.4% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, FORD MOTOR CO reported lower earnings of $1.42 versus $5.01 in the prior year. This year, the market expects an improvement in earnings ($1.61 versus $1.42).
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Automobiles industry and the overall market, FORD MOTOR CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: F Ratings Report