Fitch Ratings Services has assigned 'BBB-' rating on Ford Motor Co.’s (F) proposed senior unsecured notes due in 2043 and Issuer Default Rating (:IDR). Fitch conferred a stable outlook on the rating.
The rating was based on the company’s strong liquidity position, lower pension obligations and higher profitability from North American operation. Moreover, the competitive product portfolio and lower cost structure of the company helps it to overcome any cyclical and secular pressures in the global auto market.
The company’s cash balance has improved over time. Ford had cash and marketable securities of $24.1 billion as of September 30, 2012, up from $20.8 billion in the corresponding period a year ago. However, the company is under pressure owing to the uncertainty in the automobiles market. Declining demand in Western Europe and sluggish growth in the emerging markets will be challenging for the company.
Total Automotive debt remained unchanged year over year at $14.2 billion at the end of third quarter of 2012. However, the proposed notes will increase the company's long-term debt.
Recently, Ford made an offering of $2 billion 4.75% senior unsecured notes due in 2043. The proceeds from this offering will be utilized to repay the existing debt and make contributions for the pension plans. According to the Fitch Ratings Services, the company’s initiative of allocation of proceeds to its pension plan will reduce pension liabilities without increasing debt.
Ford, the largest automobile producers in the world, posted a 17.6% rise in earnings per share to 40 cents in the third quarter of the year from 34 cents a year ago, driven by impressive results in its North American operation and, to some extent, its Asian operation. With this, the company has also surpassed the Zacks Consensus Estimate by 10 cents per share. Total profit rose 15.6% to $1.6 billion from $1.4 billion a year ago.
However, total revenue in the quarter slid 3.0% to $32.1 billion due to lower revenues in South America, Europe and Financial Services operations that offset the marginal improvement in revenues in North America and Asia. However, revenues were higher than the Zacks Consensus Estimate of $31.0 billion for the quarter.
Ford, whose cross-town rivals include General Motors Company (GM), maintains a short-term Zacks #3 Rank (Hold) and a long-term Neutral recommendation.
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