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Ford's Impressive Growth Momentum Won't Halt Soon

August 25, 2014 | About:
sandyinvestment

sandyinvestment

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Automaker Ford (F) released impressive results for the second quarter of fiscal 2014. The company saw good improvement in revenue and pretax profits were also fantastic. Management is happy with the performance, as it was the 20th consecutive profitable quarter for the company. With outstanding results in North America and the Asia-Pacific region, Ford is looking determined to deliver better results in the future. Let us find out what does Ford have in its strategic game plan for future that will help it gain market share?

Financial performance and strategies

Ford’s financials were quite good with its quarterly pretax profit clocking $2.6 billion. This growth was impressive and was $44 million more than last year’s same quarter. Since Ford is seeing growth in markets of America, Asia-Pacific and Europe, its net income is seeing good growth and the company posted net income of $1.3 billion. Ford is counting on its strategies and is expecting better results in the future. It is expecting its pretax profit range between $7 million to $8 million when it launches a wide range of products in the near future.

It is exciting to see Ford’s efforts to gain market share. Though it struggled in the past and was not so impressive in the stock market, the automaker justified its turnaround efforts, having posted some good numbers on the board. The One Ford plan is still in operation and the company is seeing some good yield from the plan. It is focusing on all four elements of the plan and expecting better synergies from it in coming days.

Innovative moves

Given the stiff competition in the auto industry, Ford is making wise innovations in its products to keep a strict check over its rival’s moves and to be competent against them. To achieve this stiff edge in the market Ford is passionate about product excellence and is committed to seeing product improvement by innovation and bringing in new products from its product pipeline. With such efforts focused on strengthening the product portfolio, Ford is thinking to add more value to its share holders' wealth indicating growth by the company.

Moving forward, Ford is seeing positive cash flow from the automotive segment. The company is seeing good growth in this segment as it is seeing good sales for its vehicles in some potential markets such as North America and Asia-Pacific. Ford is even expecting good sales in China as well.

European improvements

Ford was not expecting much from the European market as the market was declining and was not responsive due to stiff government policies. With the high interest rates prevailing in the region, it scared many customers away from purchasing vehicles. But the European market is showing positive signs. It can be seen in the last quarter’s sales report where Ford managed to hit profit in Europe  in the second quarter after three years.

This was a good sign for Ford as the company was worried because of slumping sales in Russia. Ford is also pleased with its position in the market against its rival General Motors which is taking a topsy-turvy ride due car recall by it due to faulty ignition switches. This scared the investors away from GM.

Conclusion

Ford is also working on a share repurchase program which it undertook in the past worth 116 million shares. This is a strategic move by the company to offset 3% dilutive effect of potential convertible debt and stock-based conversions. For fiscal 2015 Ford will focus on the South American weakness and will be counting on the new product launches to be profitable in future.

With a trailing P/E of 11.10, Ford looks reasonable. The CAGR of 12.23% shows that Ford might justify its efforts in tapping the emerging markets. Besides this, Ford is seeing good signs in Europe, which are expected to improve in the future. All these facts indicate that Ford is a good pick as of now.


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