The automotive segment is growing due to low interest rates, which has supported the automotive segment by triggering sales of new vehicles. This has led to a tailwind for companies such as Ford (F, Financial), Toyota (TM, Financial), General Motors (GM, Financial) and others.
But if we talk about Ford in particular, the company had a soft start to fiscal 2015 as it posted a loss. The company lost market share on the back of lower U.S. sales. It was busy redesigning its F-150 pickup truck, which drove away customers in South America substantially. But, there are some bright spots that can help Ford improve in the long term.
First-quarter financial stats
Ford’s quarterly revenue fell by 5.6%, but it didn’t surprise much as the company was expecting this decline in revenue. This was led by the decline in the company’s sales by 1.3%; however, this beat analysts’ expectation as they were expecting a decline of 3.3%.
But if we look at the year-over-year sales, the company has really shot up by 5.4% which indicates that Ford definitely has much room for growth in the long term.
Ford fell shy on earnings as well. The motor company reported a slight miss at $0.23 per share which also came better than the consensus estimates of $0.25 per share drop. Higher focus on the pickup truck eroded its sales in South America and due to this its net income also declined by $65 million to $924 million.
The company even suffered profitability in the North American market as well by a margin, displaying planned reduction in daily rental sales and lower share of F-150 in the sales mix.
But the management is still confident of a solid performance by Ford in the long term. So do investors have to be cautious due to losses? What are the reasons behind this confidence?
Is Ford a good long-term investment?
Ford has been serving the automotive segment for ages and has been successful in creating a leadership image in the market. Its sedan and pickup truck segments are well received by customers.
The first quarter wasn’t up to the mark, and Ford had to see losses. This might have questioned Ford’s leadership and if it will be able to perform better in future. But it is now looking for a rebound and a solid performance in the coming quarters. It is now undertaking several strategies, and the management is now confident of a breakthrough in 2015.
Under its strategic initiatives, Ford will be largely focusing on its One Ford plan. In addition, Ford is also focusing on delivering product excellence and bringing innovations in its offerings which will benefit its shareholders as well creating good opportunities to regain its lost market share.
If we look closely Ford’s sales is improving. The motor company faced losses in the first quarter due to more focus on re-designing its F-150 pickup. But now, its efforts seems to paying off for it as demand for F-150 pickup truck is heating up. This is a solid opportunity for the company as the automotive segment is booming, the growing demand for Ford’s vehicles will lead the company to have a bigger piece of the pie.
In fact Ford has sold 2% more vehicles in the first five months this year as compared to the first five months of last year.
Ford has plans to stretch itself beyond the national boundaries. There is a growing market for luxury vehicles in Africa and Ford wants a bite of the cake. So it is moving further to Africa. Seeing the growth in the industry, Ford has plans to launch 10 new vehicles in the region that will allow it to capture the luxury car market in Africa.
Conclusion
From the above discussion, it is clear that Ford’s sales are going to see good growth in 2015 with the heating up demand for F-150 and it stretch in Africa in the luxury car segment. But the most interesting and catchy thing about Ford is its valuation levels. The poor results have led Ford’s valuation to fall back but considering its financial flexibility and sales growth these cheap valuation levels are solid opportunity for the investors. This surely makes Ford a wise investment now.
