GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

Ford Is Still a Solid Long-Term Buy

April 23, 2014 | About:
kcpl

kcpl

0 followers

Ford (F)'s performance has been better in comparison to peers like General Motors (GM) and Toyota Motor (TM). Ford is on the right track with its various strategies going forward. Moreover, Ford, with its turnaround strategic initiatives, provides a comprehensively better outlook for current fiscal 2014 that could possibly help investors gain in the long run.

A Look at Different Regions

Ford’s European operations showed signs of improvement as compared to last year, with losses coming down to $571 million in the last quarter. Operating margin and pretax loss was 5.8% and $1.6 million in Europe, respectively. Ford’s European market share remained unchanged in the fourth quarter year on year.

Ford’s South American operations also registered losses of $126 million as compared to a profit last year. The losses were on account of plant down time in Brazil to prepare for new launches in 2014, along with lower production in Venezuela due to limited availability of dollars. Thus pre-tax loss accumulated to nearly $271 million that was partially offset by higher pricing.

Investments for the Future

As stated above, the company looks at 2014 as a turnaround phase. Therefore, the company is planning to roll out around 23 new models globally, calling it “the busiest year in its 111-year history.” These launches will certainly create some pressure on its margin. Besides, the prevailing tough competition also puts heavy pressure on its margin that has decreased of late.

Nevertheless, the investment in new vehicles should assist Ford in the future given the short-term pains. Moreover, the automaker is also positive about its Europe and overseas market and estimates to cover its losses and reach break-even point by 2015. Ford, therefore, is counting on new models to boost its growth in the euro zone.

Moreover, the company has launched 11 new vehicles over the past 15 months and is planning to roll out 10 new models in 2014 alone. These strategic moves have already started working on behalf of the company as its sales grew 9.25% in Europe in January, backed by the new launches that will certainly help the company to sustain the momentum.

Also, Ford has witnessed strong market growth in China as sales rose 14.1% in the fourth quarter, and production rose to 21.2% as compared to last year. This strong growth in sales was mainly driven by passenger cars. Also, the January data stated an increase of 53% in Ford’s sales in China. Ford, therefore, plans to increase its market share in China with new launches scheduled one after the other in current fiscal 2014.

However, the South America economy is still a concern for the automaker, but the company is focused with its strategy of expanding the product line up and replacing older models. Apart from this, Ford is also bolstering its infrastructure worldwide to support production of new vehicles, with innovation of new products that will undoubtedly help to control the situation and yield profits for the company.

Ford promises to add nearly 5,000 new jobs in the U.S. alone and another 6,000 abroad in fiscal 2014 for its research and development departments mainly. This leads to the fact that Ford is focusing on battery-based technology as the U.S., and other markets are tightening emission and mileage standards.

Conclusion

Ford is doing well on a global basis and investors should definitely consider investing in the stock. The company is making investments for the future that should help it increase market share and get better.


Rating: 4.0/5 (1 vote)

Voters:

Comments

Please leave your comment:


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