New Threads Only:  Add to Google Reader or Homepage
New Threads & Replies:  Add to Google Reader or Homepage
Forums are for serious investors only. GuruFocus Forum Rules.

Forum List » Value Ideas and Strategies
Share and discuss value investing ideas and investing strategies.
New Topic Search
Goto Thread: PreviousNext
Goto: Forum ListMessage ListNew TopicSearchLog In
Ford: A Stock with Truly Gigantic Potential
Posted by: abirk (IP Logged)
Date: March 13, 2014 09:58AM

Ford Motor Company (F) is one of the first American automotive companies that even today successfully manufactures and sells automobiles, trucks, buses and automotive parts. Ford is the second largest U.S. automaker and the fifth largest vehicle seller in Europe and the world, based on 2010 vehicle sales.

Ford is a producer of cars and trucks. The company also engages in other businesses, such as financing vehicles. Ford operates in two sectors: automotive and financial services. Through its sectors, Ford provides a wide range of vehicles, vehicle parts and services to a multitude of consumers and companies worldwide. It is now revolutionizing its vehicles in order to compete on the world stage.

What the Company Has Gone Through Recently

Ford recently marked production of its 2 millionth EcoBoost engine. It was launched in 2009. Factory output averages more than 100,000 engines per month, up from 65,000 units in 2012, according to Ford. After reinstating its discontinued dividend in 2012, Ford doubled it this year, and it recently yielded 2.4 percent.

Ford is a well-established vehicle products and services producer operating in a multitude of countries across the globe. The company is giving CEO Alan Mulally a $13.8 million bonus for the automaker’s terrific performance last year. Over the past four quarters, earnings and revenues have been rising, which has left investors pleased. Relative to its peers and sector, Ford has been a relative year-to-date performance leader.

Ford has been redesigning its vehicles to deliver more value and better fuel economy, and it has consolidated its vehicle platforms. It’s all paying off. Ford’s Fusion could top 300,000 in sales this year and is threatening the Camry’s dominance. And Ford has sold more than 645,000 F-series trucks so far this year.

The company posted its all-time best performance in the Association of Southeast Asian Nations region in 2013. Sales in the region rose more than 7% year over year to nearly 96,000 units. Thailand drives the volume in the ASEAN region, with the Ranger, Focus, and EcoSport leading Ford's sales charge. Both the Ranger and Focus nameplates posted their best-ever full-year of sales, which will help continue strong momentum in 2014.

Standing a Chance in the Emerging Markets

Another key to Ford’s ultimate success will be its performance abroad. Its sales in emerging markets are still far smaller than its domestic sales, but those economies and sales numbers are growing far more briskly. Sales in China recently grew by 55 percent over year-ago levels, and it is investing heavily in India. Even in the U.S., sales popped by 14 percent in October. In Europe, where Ford and others have struggled, losses have been narrowing.

Positive Attitude Towards Green Vehicles

Cars that are fuel inefficient and emit large quantities of CO2 heavily pollute air and negatively affect the environment. Consumers are aware of this negative impact and are more likely to buy “green” vehicles that emit much less CO2 and are fuel-efficient.

Investors also see good potential in Ford's shift to greener cars. While other carmakers are pushing into the electric vehicle space — such as Tesla (TSLA), who aims to introduce its electric sedan by 2012 — Ford has plans for a couple of plug-in models in the next couple of years like the Focus. It's already working with Microsoft to utilize its Hohm energy management application for recharging the cars as well.

What to Expect

Ford has decided to produce single, streamlined global lineup of its models. The carmaker no longer produces customized vehicles for different regions but focus on designing and engineering the car that fits different regional tastes and regulations. It significantly decreases costs for the company and drives record profitability.

Many more models are on the way — and many of those will be built in China. That allows Ford to avoid China's steep tax on imported vehicles, though at a cost — profits will have to be split with Ford's Chinese joint-venture partners, as required by Chinese law. Still, the increase in sales should make that trade-off more than worthwhile.

The company says that China is on the verge of becoming its second-largest market after the U.S., eclipsing the company's longtime stronghold in Europe. By 2020, it's possible that Ford's sales in China could be even greater than its sales here at home. That kind of growth will drive a big jump in profits for Ford. And that will be a great thing for Ford's stock.

Ford’s leading F-150 pickup — the best-selling vehicle in America — is being primed for release later this year, as is the new 2015 Ford Super Duty line. Ford said the optional second generation of its 6.7-liter Power Stroke turbo-diesel V8 will be packing more power than before, with 440 horsepower and 860 pound-feet of torque. That’s an increase from the 400 horses and 800 pound-feet from the model year prior.

On top of Ford's existing technology that enables its cars to park themselves, detect dangerous driving conditions and assist with emergency braking, Ford has ambitious plans for its next generation of vehicles. The automaker announced strategic partnerships with the University of Michigan and insurance provider State Farm that promise to bring Ford one step closer to offering self-driving cars.

To End

Ford owners are among the most loyal of all car owners, according to Consumer Reports data. Some 56% of Ford owners are likely to buy another one. Ford has certainly been performing well as a company over the past few years — making good vehicles, being consistently profitable, recently reinstating its dividend, and doing a remarkable job paying down its debt.

Ford's F-150 is the best-selling vehicle in the country, and its new initiatives designed to generate greater fuel efficiency will only improve its standing in the near future. Ford simply dominates the pickup truck market, and its international operations are back on track. It will surely reap good returns to its valued shareholders.



Stocks Discussed: F, TSLA,
Rate this post:

Rating: 3.7/5 (3 votes)





Sorry, only registered users may post in this forum.

Please Login if you have an account or Create a Free Account if you don't
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK
Email Hide