On Nov 12, 2013, we raised Ford Motor Co. (F) to Outperform from Neutral. The upgrade was based on several factors including its global expansion plans, its efforts to make the European business profitable, the success of the One Ford plan and its continued focus on hybrid cars.
Reasons for Upgrade
Ford posted a 12.5% rise in earnings per share of 45 cents in the third quarter of 2013 from 40 cents in the same quarter of 2012 (all excluding special items). With this, this Zacks Rank #1 (Strong Buy) stock surpassed the Zacks Consensus Estimate of 38 cents.
Revenues in the quarter grew 12.2% to $36 billion, exceeding the Zacks Consensus Estimate of $33.8 billion. The improvement was attributable to increased wholesale volumes in automotive business and higher market share in all the regions.
Ford plans to restore profitability in its European operations by mid-decade and aims to achieve long-term operating margin between 6% and 8%. The efforts are yielding results as the company now expects a lower loss from Europe in 2013 in comparison to 2012.
Additionally, Ford is pursuing a major expansion plan in the mature and emerging markets, primarily Argentina, Brazil, China, India and Thailand. Moreover, the company is creating a new business unit – Ford Middle East and Africa, to capitalize on the growing importance of the Middle East and African markets.
Further, Ford’s accelerated product transformation plan “One Ford” is positively impacting the company. Moreover, the automaker continues to focus on hybrid vehicles that played a pivotal role in its revival since late 2006. The company announced its plan to invest $135 million to develop key components, including advanced battery systems, for its next-generation hybrid-electric vehicles.
As a result of these favorable factors, we have a positive outlook on Ford, despite rising expenditure and debt.
Other Stocks to Consider
Other major automobile stocks worth considering are Fox Factory Holding Corp. (FOXF), General Motors Company (GM) and Daimler AG (DDAIF). While Daimler is a Zacks Rank #1 stock, the other two carry a Zacks Rank #2 (Buy).