The car industry was one of the hardest hit in recent years. The
recession was particularly cruel to automakers, which were already
bogged down by union disputes, decreasing sales of U.S.-made
vehicles and climbing oil prices.
But lately, things have started to turn around.
Just this week, Toyota (
) announced that its worldwide production in March surged 97%,
following an 83% boost in February.
This may be somewhat surprising as Toyota was not only hit by the
Great Recession, but the company created its own problems after
issuing several recalls. (I own a car that was part of the
accelerator pedal recall and just this week, I received a notice
about another floor mat recall. Will it ever end?)
In journalism school, one of my professors used to say, "All you
have is your reputation." Meaning that you better make sure the
story you're publishing is accurate because once you break the
public's trust, it's awfully hard to gain back.
Toyota will be reeling from these recalls for years, but it seems
that the public is already starting to flock back to the automaker.
Many of Toyota's vehicles are still highly rated and its offering
of hybrid vehicles is surely helping as consumers make choices away
from gasoline and toward Green.
But Toyota isn't the only company bouncing back with such vigor.
Honda Motor (
) also reported an increase in global output in March, up 26% from
a year ago. Nissan Motor's March production grew 85%.
Ford Motor (
), which did not take a U.S. government bailout and has perhaps
been the most solid U.S. carmaker in recent years, had some news
this week when it released first quarter fiscal results.
The company earned $2.1 billion in the first quarter and said it
expects to be solidly profitable this year. Ford reported a net
income per share of 50 cents, its highest quarterly profit in six
years. Revenues rose 15% to $28.1 billion.
And the company is making money around the world, from its North
American market to Asia, South America and Europe. Ford saw an 84%
surge in sales in China, while its U.S. sales jumped 37%. The
company made $1.2 billion in North America, which had been
hemorrhaging money in recent years.
Ford has been featured in both Cabot Top Ten Report (where
subscribers currently have more than a 40% gain) and Cabot Market
Letter, both edited by Michael Cintolo.
This is what Mike wrote about Ford when he recommended it in March
in Cabot Market Letter:
"Ford Motor is a powerful turnaround story, as sales of its cars
and trucks are ramping up in a big way-U.S. sales rose a whopping
43% in February from the prior year, including a big 28% jump in
retail sales. It's gaining market share from GM and, recently, from
Toyota, whose troubles are well documented. And earnings are
already beginning to go through the roof; the firm has been solidly
profitable the past two quarters and could earn more than $1 per
share in 2010. While we can't say F is in the first inning of its
advance, we're impressed with the stock's long 18-week base during
the second half of last year, its powerful advance into January,
and then its tight seven-week zone during the market's correction.
F has recently broken above resistance at 12, resuming its major
But the market's weakness and Ford's solid, but
less-than-blockbuster earnings report seem to have put the brakes
on the stock for now.
Mike wrote a Cabot Wealth Advisory earlier this week about earnings
season perceptions and reactions that's an absolute classic. (If
you haven't read it yet, I urge you to check it out by clicking the
link near the bottom of this issue.)
One part is particularly relevant to the Ford news, so I'll reprint
"It's earnings season, and that means every day there are stocks
gapping up or down following their quarterly reports and conference
calls. Most days, at least one of our recommendations in one
of our various newsletters is gapping up or down from the opening
"In almost every case, the company we're following will have met or
exceeded the official analysts' estimates for sales and
earnings. And the forecast is usually pretty good, too.
Yet despite this "good" news, the stock can often tumble a few
percent, and in a few cases, fall much more, breaking through key
"Whenever this occurs, I am usually inundated with emails asking
"Why is the stock down when the numbers were so good!" My
usual answer is simply, "Expectations were higher than what the
company delivered." But I should probably also say, "It
doesn't really matter WHY the stock is down; the fact that it's
down is all you need to know."
"Said another way, it's not the news, it's the REACTION to the news
that counts. That goes for earnings reports, but also to any
headline news in the stock market. News is only "good" if it
results in upward price movement."
So while Ford's earnings report was solid, it may not have been
enough to keep the stock in its upward advance. Mike put the stock
on hold this week and he's watching the 13 area closely for signs
Until next time,
Editor of Cabot Wealth Advisory