Ford (F, Financial) has been subjected to a number of analysts' downgrades in the recent past, and the pessimism has taken a toll on the company’s stock. Ford has lost as much as 20% in the last few weeks, and this in my opinion, is a great time for opportunistic investors to add Ford to their portfolios. The company’s long-term prospects look bright and it should start benefiting as soon as the European business recovers.
A decent quarter
Ford’s second quarter revenue fell y-o-y, however the company’s results were decent as it managed to surpass the consensus estimate on earnings as well as revenue. It declined to $37.4 billion from $37.9 billion, above the analysts’ estimate of $36.16 billion. The fall in the revenue can be traced to the unfortunate performance of the company in Europe and South America and the launch of new products in North America.
The company’s earnings for the quarter came in at $0.32 cents per share, a decent increase in comparison to $0.30 per share last year. Ford’s second quarter earnings escalated to $1.311 billion from $1.233 billion last year.
Long term future still looks bright
The ONE Ford plan is said to be the reason behind the good results of the second quarter. Increase in earnings and sales are expected from investments made in new products. Global growth problems will cause lack in improvement in 2015. Price falls in oil and Western sanctions has slowed down the Russian economy.
Global economic growth of the company is projected to be in the 2.5-3% range, and about 85 million to 90 million units global industry sales. Inflation, poor economic growth and high interest rates continues to strike South America and Brazil. The agenda of the company is to follow the ONE Ford plan in the future, inspired with the second quarter results. ONE Ford plan is built on convincing vision, relentless functioning and wide-ranging strategy, everything leading to lucrative growth.
The launches and investments of 2014 will give the company a payoff of strong product line with good revenues, margins, and higher volumes in 2015.
Ford's pre-tax profit is expected to be in the range of $7-8 billion within a period, with an extraordinary figure of global launches. Automotive revenue is expected to be equivalent to 2013 and automotive margin to be less than 2013.
The company is relying on its new releases to push escalation. Case in point: Ford's Fusion vehicle, with a forceful outline, is gaining praises. Its novel outline and better efficiency, benefited by the Ecoboost turbocharged motor, have boosted its profits.
The next in line is the Escape, with its third-gen series seeing rocketing sales. It runs parallel to the accomplishment of Fusion, and there is a high probability of both of them touching the 300,000 mark in annual sales stamp in the U.S.
Ford likewise saw an ascent of 6.6% in its European sales in the first six months of 2014. The company keeps on witnessing high sales in retail and commercial vehicles segment. Since Ford plotted its turnaround plan for Europe in 2014, it has launched 15 new cars and has more in the pipeline for the remainder of the year. Ford ought to keep picking up footing in the European auto advertise as it recuperates.
Conclusion
All the negativity surrounding Ford’s stock has made its valuation ridiculous as the stock is too attractively priced to be ignored. The company’s long-term goals are still intact and the low valuation makes it a great buy. Moreover, Ford offers a juicy dividend which is an added plus for investors. Thus, I believe Ford’s stock will continue to rise and I have a $20 price target on it.
