On May 16, we maintained our Neutral recommendation on
Ford Motor Co.
) based on its higher profits in the first quarter of 2013 and
strong performance in North America and Asia Pacific Africa.
However, we are concerned about the higher structural costs and
economic weakness around the world, particularly in Europe.
Why the Reiteration?
On Apr 24, Ford posted an increase of 4.1% in earnings to $1.6
billion and a 5.1% rise in earnings per share to 41 cents in the
first quarter of 2013, beating the Zacks Consensus Estimate by 3
Revenues improved 10.5% to $35.8 billion, exceeding the Zacks
Consensus Estimate of $32.8 billion. The improvement in revenues
and earnings was mainly attributable to Ford's strong performance
in North America and Asia Pacific Africa, partially offset by
unfavorable exchange rate in South America and uncertainties in
Following the release of the first-quarter results, the Zacks
Consensus Estimate for 2013 increased 0.7% to $1.44 per share.
Meanwhile, the Zacks Consensus Estimate for fiscal 2014 declined
1.7% to $1.71 per share. With the Zacks Consensus Estimates for
both 2013 and 2014 remaining almost flat, Ford currently carries
a Zacks Rank #3 (Hold).
The company is expanding its foothold in the emerging global
markets including Argentina, Brazil, China, India and Thailand.
Ford expects 70% of its global expansion to be in Asia, primarily
China and India. Ford anticipates that these investments will
eventually bear fruit with a 50% improvement in sales to 8
million vehicles in 2015. Small car sales, as a percentage of
total sales, are expected to go up to 55% by 2020 from the
current level of 48%.
Ford continues to focus on hybrid vehicles. The company plans to
invest $135 million for its next-generation hybrid-electric
vehicles. It expects hybrid sales to improve owing to the new
launches and plans to triple production capacity of electrified
vehicles by 2013.
However, rising commodity and structural costs for replacing
older vehicles with new models are apprehended to mar the
company's results. In addition, pension and health care are some
of the major issues concerning the profitability of the company
in the current competitive industry.
Other Stocks to Consider
Few stocks that are performing well in the broader industry where
Ford operates include
Tower International, Inc.
STRATTEC Security Corp.
). All the stocks carry a Zacks Rank #1 (Strong Buy).
FORD MOTOR CO (F): Free Stock Analysis Report
STRATTEC SEC CP (STRT): Free Stock Analysis
TOWER INTL INC (TOWR): Free Stock Analysis
VISTEON CORP (VC): Free Stock Analysis Report
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