Ford: A great American auto company

Strong domestic sales and improving global prospects suggest a potential 30% gain in the stock over the coming year.

By TheStockAdvisors May 30, 2013 9:57AM

Ford emblem at the Chicago Auto Show JEFF HAYNES/AFP/Getty ImagesBy Brian Hicks, The Wealth Advisory


All of the Big Three Detroit automakers gained market share in the United States in the first three months of 2013. That hasn't happened since 1993.


And Ford (F) -- one of the greatest American companies -- led the pack, with a 17% gain. New cars that are affordable and highly-rated by quality surveys are a big reason for the gain. It was Ford's 15th consecutive quarterly profit. And it was carried by North America. Indeed, Ford's North American operations booked a pre-tax profit of $2.44 billion. That's the best number since at least 2000.


The average age of a car in the U.S. has grown to 11.1 years, while the average truck is 10.4 years old. As a leader in both segments, Ford has solid upside for sales and profits.


And Europe? It has been, well, not good for Ford. In the first quarter, Ford lost $462 million in Europe, and it has already suggested that it will lose $2 billion in Europe this year.


But that shouldn't sway the savvy investor from Ford. Because the seeds of a dramatic turnaround in Europe are already in place.


Ford reported that its Fiesta was Europe's top-selling small car in the first quarter. Ford sold more than 77,800 Fiestas in Europe during the quarter -- over 41,000 of those in March alone. Ford expects to break even in Europe in 2015, and without that $2 billion in losses, per-share earnings will look a lot better.


What about China? Ford Motor and its joint ventures in China posted an impressive 37% gain in April sales to 75,331 vehicles driven by strong demand for Ford Focus and new Kuga models. These numbers will likely get bigger as Ford carries out expansion plan in China.


Ford will triple its lineup in China by introducing 15 models, including the Kuga small sport utility vehicle by 2015. Currently, the company sells seven models in the country.


Ford will build new plants, raising its capital spending to about $6 billion annually by mid-decade from $4.3 billion in 2011.


Further, Ford is no slouch when it comes to "green" electric and hybrid cars. Ford sold 8,481 hybrid cars in April. Yeah, it still has work to do. But the total number of Ford hybrids sold in the first four months of the year grew to 29,561 units. That compares very well to Ford's record of 35,496 hybrids in 2010.


Now, about that dividend: Ford currently pays $0.40 a year for a yield of 2.9%. Not bad. But there is significant upside for this payment. The current payout ratio is just 17%. That's less than half the payout ratio for the S&P 500 ($INX) as a whole.


Ford would have to double its dividend just to have an average payout ratio. It clearly has the cash flow to do so. And we think the dividend growth for Ford will be among the biggest of any company you can own.


Not only that, but we expect a solid 30% gain for the shares over the next 12 months. With a forward price-to-earnings ratio of 9, Ford is currently valued at a significant discount to the S&P 500. Buy Ford at or below $15 a share.


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Tags: F
20Comments
May 30, 2013 12:38PM
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And they didn't take any money from the taxpayers. How about that. We should have let GM go down.
May 30, 2013 12:51PM
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First for our money they removed over 600 thousands of used car s from the market ( cash for so called clunkers) and now they enjoy high demand. Thank you president Obama - car prices went up 30

- cash for clunkers worked

 Powell owns Powell Motors, an independent used-car dealership across the Willamette River from downtown Portland, Ore.

"Obviously a lot of them were junk and deserved to be called clunkers," says Powell, who owns the store his father began in 1933. But a sizable chunk — Ford Explorers and other four-wheel-drivers — were "decent cars," he says. "I think we’re paying for it now. Prices for used cars are up, and the cheaper stuff was higher now than it was before."

May 30, 2013 5:47PM
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I'll only buy FORD---they have top of the line vehicles---AND THEY DID NOT TAKE ANY TAXPAPER MONEY!!!!!!!!!!!!!!!!!!!!!!!
May 30, 2013 1:52PM
May 30, 2013 7:37PM
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The length of my JohnsonRod could do 2X.  Any Hoes and Beotchez wanna buy in on an inch or two??
May 30, 2013 5:11PM
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And when is Alan Mullaley going to retire?

 

 

May 30, 2013 2:54PM
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Glad Mr. Whiny isn't buying GM cars, don't want no "whinybabies" driving Chebbys.
May 30, 2013 3:01PM
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Ford is doing fine....Maybe Europe is down, but don't count them out, in China and India.

And they are making good headway in the States, trucks are helping; Mulally(sp) is doing a decent job.

 

Since accumulating for 2-4 years, we are up about 30-40% and I expect that 3%+ dividend to start raising...You bitching may not be in on the ride...eh.?

 

Ford has gotten Government or taxpayer's monies also...Put that to rest..Or do some reading.

Most all the Foreign Manf's have too, in one incentive or the other..??

Even if only Local or State....Quit putting it all on GM's back.

May 30, 2013 3:52PM
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Hmmm... Ford secured massive syndicated credit facilities before the markets crashed. Foresight or ? The Cash for Clunkers program mainly took big Fords off the road. The Fusion increased nearly 50% after the close of that program and all cars now exceed the average buyer's budget, so, nearly all the credit on cars is SUBPRIME. Bernanke buys those bad loans off the table so banks can make more of them. Logic suggests that with the youngest soon-to-be adult generation not wanting cars and those in their twenties barely able to get out of their mom's basements... all car companies are doomed.

Let's not confuse Bernanke pumping the stock markets up with his fake money printing, and business with potential because they are relevant. Cars use gasoline so they are not relevant.

May 30, 2013 1:22PM
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This article is soo darn stupid.  Fords global prospects.  They are sinking in Europe, they are decades behind in China, Lincoln needs to be shut down, and their long term debt is swelling out of control.  Ford has over $100 BILLION in long term debt and their cash flow over the last 6 months has dropped while their debt has increased.  Anyone that knows how to read accounting books knows Ford is in serious trouble.  Most of their assets on the books are their receivables from Ford Motor Credit which is the only way they lease cars.  If people stp paying their leases and loans Fords cash is sunk!  They are fully exposed to another recession.

 

GM is #1 in the USA.  #1 in China.  For those of you that do not know those are #1 and #2 largest markets in the world.  And GM has their new trucks rolling out soon that just blow everything out of the water.  Now a lawsuit or 10 against Ford with their Ecopoop motors.

 

Facts are Ford builds their vehicle as cheap as possible.  Remote starters are dealer installed options that customers want and pay for out of their pockets and get nothing for in the long run.  GM its standard fare in 95% of their vehicles.  Daytime running lights?  NOT IN THE USA but they are in Canada!  Touchscreen radio?  With the $2,000 SYNC and navigation system otherwise no.  They leave a lot to be desired as far as what you get for the price you pay.  

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