Ford hitting on all cylinders

Strong US and global sales point to a higher stock price and a rising dividend.

By TheStockAdvisors Sep 6, 2013 11:58AM

Ford 2011 Explorer © Toby Talbot, AP PhotoBy Brian Hicks, The Wealth Advisory


Ford (F) is hitting on all cylinders right now. In its last earnings report, Ford crushed the $0.37 a share expectation with $0.45 a share for the full year.


The company is on pace to deliver 16 million vehicles this year, the most since 2007. Ford made $4.77 billion in its home region during the year's first six months, driven by surging demand for Fusion family cars and F–Series pickups. The company is adding factory capacity to build more of both of these models starting this quarter.


In North America, Ford has earned $2 billion or more, with an operating margin of 10% or more, in five of the past six quarters.


The $2.3 billion second–quarter profit in the region was achieved with U.S. industry sales still running at roughly 1.5 million vehicles short of the 2000 peak.


The results in North America are being driven by sales gains, especially of lucrative F–Series pickups, said Matthew Stover, an analyst with Guggenheim Securities.


Reviving U.S. housing sales and a domestic energy boom are fueling demand for full–size trucks, with F–Series deliveries jumping 26% to 198,643 during the quarter.

Ford cut its loss forecast for Europe to about $1.8 billion from $2 billion, which is very important as that $200 million essentially goes right to the bottom line.

And in China, deliveries of the Focus increased 69% in 2013's first six months. That makes Ford one of the fastest–growing car makers in the world's largest auto market.


Ford's Asia/Pacific/Africa operations earned a record $177 million in the quarter after losing $66 million a year earlier. The automaker is introducing 15 new vehicles in China by 2015 to try to catch up with market leaders GM and Volkswagen AG.


We remain very bullish on Ford. The shares appear undervalued, and there's a lot of upside for the dividend. In fact, we expect a dividend hike when it reports third quarter earnings.


And over the next 12 months, we expect at least 50% upside for the dividend. There could be more. Throw in at least 18% upside for the stock, and you have a solid investment here. We are raising our buy limit to $17.50. Ford is a "strong buy" under $17.


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