Ford gets its motor running
With sales strong everywhere but Europe, the automaker's stock won't stay stuck in neutral for long.
The reason is simple: Europe. In its most recent earnings report, Ford forecast that it would lose $2 billion this year in that market, far worse than what analysts had expected. In an effort to stop Ford from hemorrhaging money there, Ford CEO Alan Mullaly is cutting jobs and closing plants in the region.
However, even though Europe will remain a basket case for a while, Ford's North American operations continue to race ahead.
Earnings in the region surged more than 33% last year to $8.3 billion. The company's good fortunes have continued into 2013. March monthly sales rose 5.7% to 236,160, buoyed by demand for SUVs and pickup trucks. Ford delivered 30,284 Fusions and 28,934 Escapes in March, a record. Explorer’s sales totaled 17,509 for the model's best March performance since 2005.
The rest of the Big Three also posted gains in March as consumers become more comfortable with buying new motor vehicles than they have been in some time.
General Motors (GM) delivered 245,950 vehicles in the month, a 6.4% increase, helped by double-digit gains in Cadillac, Buick and GMC. Chevrolet sales were little changed. But those results weren't as good as the 12% gain investors had expected.
Chrysler Group, the smallest of the Detroit 3, reported its 36th-straight increase in monthly sales, hitting 171,606 units in the U.S. in March, a 5% rise. Consumers took a shine to the Dart and Avenger sedans and Ram pickup trucks. Foreign automakers such as Honda Motor (HMC) and Volkswagen (VLKAY) also posted gains as consumers are proving to be surprisingly resilient in the face of the hike in the payroll tax.
Though all the U.S. automakers should continue to do well, Ford is by far the best bet for investors. Analysts are expecting its revenue to increase more than 10% in the current quarter, far better than the 2.4% decline expected of GM. Chrysler is part of Italy's Fiat and doesn't trade separately.
Also going for Ford is its price-to-earnings multiple of 9.2, under its five-year high. Analysts have an average 52-week price target of $15.14 on the stock, a 15% gain over where it currently trades. And to top it off, unlike GM, Ford pays a dividend that currently yields around 3%.
Ford's stock price may not put the pedal to the metal, but it won't stay stuck in neutral much longer, either.
Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
I'll be buying a sportbike :)
Buying a new car is just crazy, $25-30k+ prices, no tks
Support Ford if you can afford a new one though, they didn't bow to big government.
I'm still holding on to my awesome 2006 Lincoln LS8, while hoping FoMoCo or Lincoln will produce a new RWD, luxury sports sedan or coupe.
C'mon, FoMoCo. Gimme what I want.
F GMC! I BOUGHT A 2000 FORD CONTOUR AND OTHER THAN A FEW REPAIRS THAT BABY IS STILL RUNNING STRONG. I'VE
HAD GMC CARS IN THE 70'S AND THEY WERE WELL MADE BUT THE 80'S AND 90'S SUCK! HORRIBLE QUALITY AND AFTER
THEIR BAILOUT AND BIG UNION PAYOFFS AND GMC VOLT I'M DONE! FORD WILL GET MY BUSINESS WHEN I NEED NEW CAR!
Ford still owes the US Government money unlike GM and Chrysler. Ford, Nissan, and Tesla borrowed money to build more fuel efficient engines and Ford hasnt repaid 1 dime of that money.
It was a DOE loan and Ford has $5.9 Billion of it.
If Obama hadn't bailed out GM and Chrysler, Ford might not around today with their big losses in Europe. They shared many of the same parts suppliers in the U.S. with the other two automakers and those parts suppliers survived on GM's coat tails.
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