Why Ford Stock Suddenly Hit a Speed Bump in July

Core Viewpoint - Ford's stock drop presents a buying opportunity for long-term investors despite facing challenges in profitability and operational issues [1][2]. Financial Performance - Ford's second-quarter net income fell 5% year over year to $1.8 billion, despite a 6% increase in revenue [2]. - The company's warranty costs and vehicle recalls are significantly impacting profits, with the EV segment, Model e, reporting an operating loss of nearly $1.1 billion [2]. Business Segments - Ford Pro, the commercial vehicle division, achieved the highest operating margin at 15%, while Ford Blue, the traditional gas-hybrid division, reported a margin of only 4.4% in Q2 [2]. - The EV segment continues to struggle financially, contributing to overall losses [2]. Management Outlook - Ford has adjusted its outlook for Ford Blue's operating profit downward but maintained its overall guidance, expecting adjusted EBIT of $10 billion to $12 billion in 2024 [3]. - The company raised its full-year adjusted free cash flow outlook by $1 billion, indicating some positive financial adjustments [3]. Challenges and Opportunities - Ford must address internal challenges, including improving vehicle quality, reducing complexity, and turning around its EV business to enhance profitability [3]. - Warranty costs are expected to remain a concern for the foreseeable future, potentially lasting 12 to 18 months before improvements are realized [3][4]. - Despite these challenges, Ford Pro is performing well, and the company has sufficient liquidity, making it an attractive option for patient investors with a price-to-earnings ratio of 10 and a yield of 6% [4].