Automakers have had a banner year with many companies
outperforming the broad market by a pretty wide margin. In
has been a very strong performer, benefiting from an improved car
market, pent-up consumer demand, and strong earnings.
However, some recent news out of the automaker suggests that a
bumpy ride could be in the company's near future. In a recent
report, Ford revealed that it was expecting a sluggish sales
environment in its European and South American operations in 2014.
In fact, the company said
it expects lower pretax profits in 2014
due to these foreign markets. The firm also said that North America
will be less profitable in 2014, with operating margins slumping to
between 8% and 9%, down from a previous expectation of ten percent.
Due to this, Ford was down over 7.5% (though it is now down
about 7.0%) on the news, while other automakers also tumbled.
General Motors (
was down nearly 3% off of this report as well, while
Tesla Motors (
was off over 3.2% too.
This revised outlook may leave Ford, and the other automakers, with
a bit of a flat tire heading into 2014. For Ford, this might be
especially true given that the stock has already had some trouble
breaking out as of late, and with the poor 2014 prediction, many
might stay away from the stock in the near term.
Add this in to concerns over CEO Alan Mulally leaving-possibly for
-and the short term doesn't appear to be favorable for Ford at all.
Still, despite these negatives, there is some hope for Ford in the
coming months. Total car sales are expected to be between
16 million and 17 million units
for the U.S. in 2014, ahead of Ford estimates for 2013 which came
in at 15.9 million, suggesting still strong car demand next year.
Ford is also expected to more than double its new car launches in
2014, putting out 23 cars compared to 11 this year. This flurry of
new launches-coupled with reduced pricing to move old models out
may be part of the reason for the slump
in profit predictions for 2014. These might pay off in the years
ahead though, but obviously some patience will be needed in the
But what do you think?
Is this a buying opportunity for investors seeking exposure to
automakers? Or is Ford's run over for now?
Let us know in the comments section below!
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